TaxTMI Updates e-Newsletter
Dec 22,2020

Twelfth Schedule of Article 243W - functions entrusted to a Municipality - pure services - Exemption Notification No. 12/2017 (Entry No. 3) - supply of manpower to Government authorities - governmental authority / Government Entity

Twelfth Schedule of Article 243W - functions entrusted to a Municipality - supply of manpower to Government authorities - Whether the services provided by the applicant are covered under Clause 1 & 2 of the Twelfth Schedule of Article 243W. - HELD THAT: - Clause 1 and Clause 2 of the Twelfth Schedule relate to "Urban planning including town planning" and "Planning of land-use and construction of buildings" respectively. The applicant supplies manpower (cleaning staff, security, data-entry operators, skilled/unskilled staff, therapists) to various Government offices and institutions. The Authority found no nexus on record between the applicant's manpower-supply activities and functions of urban planning or land-use/construction entrusted to municipalities under Clauses 1 and 2. The applicant did not demonstrate that the supplied services were in furtherance of the municipal functions specified in those Clauses. Consequently, the supply of such manpower/services falls outside the scope of Clauses 1 and 2 of the Twelfth Schedule. [Paras 5]

Answered in the negative; the applicant's services are not covered under Clause 1 & 2 of the Twelfth Schedule of Article 243W.

Twelfth Schedule of Article 243W - functions entrusted to a Municipality - Whether the meals (vegetables and mutton) supplied to Government Ashrams for economically weaker students fall within Clause 1 & 2 of the Twelfth Schedule of Article 243W. - HELD THAT: - Clauses 1 and 2 concern urban planning and land-use/construction. The applicant in fact supplies vegetables and mutton (goods) to Government Ashrams rather than prepared meals. There is no basis to correlate such supply of goods with the municipal functions listed in Clauses 1 and 2. The Authority therefore held that supply of vegetables and mutton cannot be regarded as falling within those Clauses of the Twelfth Schedule. [Paras 5]

Answered in the negative; the supply of vegetables and mutton to Government Ashrams does not fall within Clause 1 & 2 of the Twelfth Schedule of Article 243W.

Pure services - Exemption Notification No. 12/2017 (Entry No. 3) - functions entrusted to a Municipality - governmental authority / Government Entity - Whether the services provided by the applicant qualify as exempt under Entry No. 3 of Notification No. 12/2017 as "pure services" provided to Government/local authority in relation to functions entrusted to a Municipality under Article 243W. - HELD THAT: - Entry No. 3 requires (i) supply to be of pure services (excluding composite supplies involving goods), (ii) supply to Central/State/Union territory/local authority or governmental authority/entity, and (iii) the services must be by way of any activity in relation to a function entrusted to a Panchayat or Municipality under the respective Constitutional Schedule. While many of the applicant's supplies are pure services to Government offices, the applicant failed to establish that those services are activities in relation to any municipal functions under Article 243W. The lone supplies of vegetables and mutton are supplies of goods and not pure services. The applicant is not shown to be a Government Entity nor to have contracts demonstrating that its services further functions entrusted to municipalities. In absence of such nexus and supporting contract details, the applicant is not eligible for exemption under Entry No. 3 of Notification No. 12/2017. [Paras 5]

Answered in the negative; the applicant's services do not qualify for exemption under Entry No. 3 of Notification No. 12/2017.

Final Conclusion: The Authority answered all three questions in the negative: the applicant's supplied services do not fall within Clauses 1 or 2 of the Twelfth Schedule of Article 243W, the supply of vegetables and mutton to Government Ashrams is not covered by those Clauses, and the services do not qualify for exemption under Entry No. 3 of Notification No. 12/2017.

HSN classification - rate of tax - classification based on chemical composition and specifications - advance ruling - requirement of adequate particulars and evidentiary material

HSN classification - rate of tax - classification based on chemical composition and specifications - advance ruling - requirement of adequate particulars and evidentiary material - Whether the Advance Ruling Authority can determine the HSN classification and applicable rate of tax of Tyre Pyrolysis Oil on the materials furnished by the applicant. - HELD THAT: - The Authority examined the applicant's submissions and documentary record and found that the product termed 'Pyrolysis Oil' is obtained from recycling waste tyres but that its chemical composition varies depending on the types of tyres used. The applicant was specifically requested to furnish the composition and supporting test reports but did not provide full details or any test report demonstrating the chemical composition of the product. The Authority observed that, in absence of specific compositional data or test evidence, it cannot reliably classify the product under any particular tariff heading or determine the applicable rate of tax, since classification must be based on the product's characteristics and specifications. Consequently, the Authority was constrained from issuing a ruling on the HSN classification or tax rate because the requisite particulars and evidentiary material were not submitted by the applicant. [Paras 5]

The question of HSN classification and applicable rate of tax cannot be answered due to non-submission of full details and supporting composition/test data by the applicant.

Final Conclusion: Application for advance ruling on the HSN classification and rate of tax of Tyre Pyrolysis Oil was not answered; the Authority declined to rule for lack of requisite compositional details and test evidence from the applicant.

Input Tax Credit - Amendment of Section 17(5) CGST Act - Leasing, renting or hiring of motor vehicles for transportation of persons - Seating capacity threshold

Input Tax Credit - Amendment of Section 17(5) CGST Act - Correction of typographical error in the earlier Advance Ruling order to reflect the correct date of amendment to Section 17(5) as 01.02.2019 and its effect on availability of ITC. - HELD THAT: - The Authority has acknowledged a typographical error in paragraph 5.2.6 of Advance Ruling Order No. GST-ARA-23/2019-20/B-46 dated 25.08.2020 where the date of amendment of Section 17(5) was incorrectly recorded as 01.12.2016. On review, the Authority found that the operative part of the order correctly states the effective date of the amendment as 01.02.2019. The corrigendum corrects paragraph 5.2.6 to state that Section 17(5) debarred Input Tax Credit on motor vehicles or conveyances used in transport of passengers until the date of amendment, namely 01.02.2019, and that with effect from 01.02.2019 ITC is allowed on leasing, renting or hiring of motor vehicles for transportation of persons having an approved seating capacity of more than thirteen persons (including the driver). [Paras 5]

Paragraph 5.2.6 of the earlier order is corrected to show the amendment date as 01.02.2019 and to confirm that ITC is available only with effect from 01.02.2019 for leasing, renting or hiring of motor vehicles with approved seating capacity of more than thirteen persons.

Final Conclusion: Corrigendum issued to correct a typographical error in the earlier Advance Ruling so that the amendment date of Section 17(5) is accurately recorded as 01.02.2019, thereby confirming that Input Tax Credit is available to the applicant only from 01.02.2019 for the specified category of motor vehicle services.

Input tax credit - works contract service - construction of immovable property - capitalization versus revenue expenditure - restriction under section 17(5)(c) of the CGST Act

Works contract service - construction of immovable property - capitalization versus revenue expenditure - input tax credit - restriction under section 17(5)(c) of the CGST Act - Whether laying of paver blocks by the applicant amounts to works contract service for construction of immovable property so as to attract the restriction on input tax credit under section 17(5)(c) of the CGST Act. - HELD THAT: - The Authority found that the expression "construction" for the purposes of the restriction includes reconstruction, renovation, addition, alteration or repairs only to the extent such expenditure is capitalized to the immovable property. The corrigendum corrects the factual characterisation in para 2.7: the expenditure on paver blocks has been booked as revenue expenditure in the applicant's books, and on that basis does not amount to construction of an immovable property. Because the expenditure is not capitalized and therefore does not fall within the scope of construction of immovable property, the restriction in section 17(5)(c) does not apply to disallow the input tax credit claimed in respect of laying the paver blocks.

Laying of the paver blocks does not amount to works contract service for construction of immovable property where the expenditure is booked as revenue expenditure; accordingly the input tax credit claimed is not barred by the restriction in section 17(5)(c) of the CGST Act.

Typographical error correction - corrigendum - Correction of a typographical error in para 2.7 of the Advance Ruling order dated 18.03.2020. - HELD THAT: - The applicant pointed out that para 2.7 of the impugned order contained an incorrect factual statement regarding whether the expenditure on paver blocks had been booked as revenue or capital expenditure. The Authority, on review, issued a corrigendum to replace para 2.7 with the corrected wording stating that the expenditure has been booked as revenue expenditure, thereby altering the factual premise relevant to the applicability of section 17(5)(c). The corrigendum rectifies the typographical error in the observation portion of the earlier order.

Typographical error in para 2.7 is corrected by corrigendum to reflect that the paver block expenditure has been booked as revenue expenditure; the corrected paragraph stands substituted in the earlier Advance Ruling.

Final Conclusion: The Authority issued a corrigendum to amend para 2.7 of the Advance Ruling dated 18.03.2020; on the corrected factual basis that the paver block expenditure is revenue expenditure, laying of paver blocks is not construction of immovable property and the input tax credit claimed is not hit by the restriction in section 17(5)(c) of the CGST Act.

Exemption under Notification No.12/2017-C.T.(Rate) (SI. No.66) - services relating to admission to, or conduct of examination by, an educational institution - composite supply and principal supply - definition and scope of affiliation under UGC/University regulations - interpretation of amendment by Notification No.2/2018-C.T.(Rate) dated 25.01.2018

Exemption under Notification No.12/2017-C.T.(Rate) (SI. No.66) - services relating to admission to, or conduct of examination by, an educational institution - composite supply and principal supply - definition and scope of affiliation under UGC/University regulations - Whether the fees charged by the University from affiliated colleges for application, registration, inspection, affiliation (including initial, permanent, continuation, increase in intake and penal fees) are exempt under SI. No.66 of Notification No.12/2017-C.T.(Rate) as services relating to admission to, or conduct of examination by, such institution. - HELD THAT: - The Authority found that the various fees (application form, application/registration, inspection, affiliation and related fees, increase in intake processing fee, and penal late application fee) are supplies that are naturally bundled and, in the ordinary course, form a composite supply with the grant of affiliation as the principal supply. The amendment effected by Notification No.2/2018 expanded the exemption at SI. No.66(b)(iv) to cover services relating to admission to, or conduct of examination by, educational institutions generally (removal of the words "upto higher secondary"). Examination of the Fitment Committee's recommendation and the terms of the notification shows the exemption targets services provided to educational institutions that are in relation to admission of students or the conduct of entrance examination for admission. The Authority, applying the regulatory definition of affiliation and the UGC/University regulations, held that affiliation is a regulatory/recognition function to enable an institution to be eligible to run programmes and does not itself constitute a service relating to admission of students or conduct of entrance examinations for admission. Consequently, services whose object and effect are to evaluate, recognise or permit an institution or course (inspection, grant/continuation/permanent affiliation, processing for increase in intake, and consequential fees) do not fall within the scope of services "relating to admission to, or conduct of examination by, such institution" as exempted by SI. No.66. The Authority therefore concluded that the claimed exemption does not extend to the composite supply at hand.

The composite supply comprising application, registration, inspection and various affiliation-related fees with affiliation as the principal supply is not exempt under SI. No.66 of Notification No.12/2017-C.T.(Rate) as amended by Notification No.2/2018-C.T.(Rate).

Final Conclusion: The Authority rules that the fees charged by Bharathiar University from its constituent/self-financing and management colleges for application, registration, inspection, affiliation (initial, permanent, continuation, additional sections, increase in intake) and penal late application are not covered by the exemption at SI. No.66 of Notification No.12/2017-C.T.(Rate) (as amended) because such affiliation-related services do not constitute services relating to admission of students or conduct of entrance examinations for admission.

Summary order. Notice issued; operation of the impugned judgment stayed interimly; matter listed for final disposal in the first week of March, 2021; Dasti permitted.

Rectification of error apparent on the face of record - >limitation on rectification under special statute - complete code/express exclusion of Limitation Act by special statute - applicability of Section 5 of the Limitation Act via Section 29(2) - clerical or arithmetical error exception to limitation - authority to condone delay under statutory scheme - rectification of tax invoice versus rectification of orders/notices

Rectification of error apparent on the face of record - complete code/express exclusion of Limitation Act by special statute - applicability of Section 5 of the Limitation Act via Section 29(2) - Whether the adjudicating authority could entertain and condone the petition under Section 161 of the TSGST Act filed after the statutory period and whether the Limitation Act (Section 5) could be invoked by application of Section 29(2). - HELD THAT: - The Court examined Section 161 which provides a three-month period for bringing apparent errors to the authority's notice and a first proviso barring rectification after six months, with a second proviso excepting purely clerical or arithmetical errors. The Court held that Section 161 constitutes a self-contained code for rectification and, by its terms and scheme, implicitly excludes the operation of the Limitation Act for the purpose of condoning delay. Accordingly, the authority had no power to condone the petitioner's delay by invoking Section 5 of the Limitation Act through Section 29(2). The Court relied on authorities holding that applicability of the Limitation Act to proceedings under a special statute depends on the scheme of that statute and whether the statute excludes or incorporates the Limitation Act's provisions; it concluded that TSGST Act's Section 161 manifests an exclusion of the Limitation Act's condonation machinery. Therefore the petition filed after the six-month bar could not be entertained on grounds of limitation. [Paras 36]

The petition under Section 161, filed after the statutory period, could not be condoned by invoking Section 5 of the Limitation Act; Section 161 is a complete code and bars rectification after six months except for clerical/arithmetical errors.

Clerical or arithmetical error exception to limitation - rectification of tax invoice versus rectification of orders/notices - authority to condone delay under statutory scheme - Whether the error alleged (invoice bearing wrong name though correct GSTIN) amounted to a clerical/arithmetic error under the proviso to Section 161 and whether Section 161 applied to rectify the tax invoice in question. - HELD THAT: - The Court considered the nature of the alleged mistake and the scope of Section 161. It observed that the second proviso to Section 161 permits rectification beyond six months only where the correction is purely clerical or arithmetical arising from accidental slip or omission in decisions, orders, notices or other documents issued under the Act. The Court held that the rectification sought related to a tax invoice issued by the principal (Bharati Hexacom Ltd.) and not to an order, decision or notice issued by an authority under the TSGST Act; further, the claimed mistake was not of a kind covered by the proviso. Consequently, the adjudicating authority correctly declined to treat the matter as a clerical/arithmetic error under Section 161 and rightly refused rectification on that basis. [Paras 6, 36]

The alleged invoice error did not qualify as a clerical or arithmetical error under Section 161 and Section 161 does not permit the adjudicating authority to rectify such an invoice after the statutory period.

Final Conclusion: The Court dismissed the writ petition, upholding the adjudicating authority's refusal to entertain the time-barred rectification petition under Section 161 of the TSGST Act and concluding that the Limitation Act could not be invoked to condone the delay; no order as to costs.

Obligation to keep and maintain accounts at the principal place of business under Section 35(1) of the CGST Act - power to determine tax on unaccounted goods under Section 35(6) read with the procedure in Sections 73/74 - confiscation permissible only where ingredients of Section 130(1) (including intent to evade or non-accounting of goods) are established - requirement of 'reason to believe' for exercise of inspection/seizure powers - penalty ceiling for record-keeping and information-offences under Section 122(1)(xvi)/(xvii) - limited to Rs.10,000 in absence of quantified tax evaded

Obligation to keep and maintain accounts at the principal place of business under Section 35(1) of the CGST Act - maintenance of electronic records under Rules 56 and 57 - Whether the respondents were justified in holding that the petitioner failed to maintain records as required under Section 35(1) read with Rules 56 and 57. - HELD THAT: - The adjudicating and appellate authorities recorded that the petitioner did not produce mandatory records at the place of inspection and failed to furnish accounts despite opportunities. The show cause notice and subsequent orders note admissions/statements that production-related documents were kept at head office and were not available at the manufacturing unit; the authorities found the computer printouts and ten summary sheets insufficient as production accounts or electronic records authenticated and explained in the manner required under the Rules. The Court accepted that Section 35(1) and Rules 56-57 require maintenance and production of specified records (including electronic records and access details) at the registered places and that the adjudicating authority legitimately proceeded on the basis of failure to produce requisite records during adjudication. [Paras 13, 16, 17, 19, 23]

The record supports the finding of failure to maintain/produce the required records at the relevant place of business as required by Section 35(1) read with Rules 56 and 57.

Confiscation permissible only where ingredients of Section 130(1) (including intent to evade or non accounting of goods) are established - power to determine tax on unaccounted goods under Section 35(6) read with the procedure in Sections 73/74 - Whether confiscation of the seized goods was justified in the facts of the case. - HELD THAT: - Section 130(1) authorises confiscation only upon occurrence of specified events (supply/receipt in contravention with intent to evade, non accounting of goods liable to tax, supply without registration, contravention with intent to evade, use of conveyance etc.). The Court found no material establishing any of those ingredients - there was no finding of supply with intent to evade, no exercise to determine tax under Section 35(6) by following the procedure in Sections 73/74, nor any other contingency under Section 130(1). Although unaccounted goods may be 'deemed supplied' under Section 35(6), the quantification/determination of tax requires proceedings under Sections 73/74 which were not conducted. In absence of the statutory ingredients for confiscation, the confiscation order was held to be arbitrary and illegal. [Paras 25, 27, 28, 30, 31]

Confiscation set aside as none of the statutory ingredients for confiscation under Section 130(1) were established and proper exercise under Section 35(6) read with Sections 73/74 was not undertaken.

Penalty ceiling for record keeping and information offences under Section 122(1)(xvi)/(xvii) - requirement of quantification of tax evaded for imposition of penalty measured by tax evaded under Section 122(1)(xxi) - Whether the penalty imposed on the petitioner in the impugned order was in accordance with Section 122 of the CGST Act and, if not, what is the correct quantum. - HELD THAT: - Section 122 prescribes different penalty outcomes depending on the nature of the offence. Offences consisting of failure to keep/maintain books or to furnish information called for fall within the category where the penalty is ten thousand rupees (or the tax evaded amount where quantification of tax evaded has been undertaken for offences attracting tax evaded measure). In the present case the authorities did not undertake any exercise under Section 35(6) read with Sections 73/74 to quantify any tax evaded. Consequently, the violations adjudicated (non maintenance and non furnishing of records) fall within the category attracting the fixed statutory penalty and not a penalty computed by reference to tax evaded. The Court therefore held that the maximum permissible penalty on the petitioner for those violations is Rs. 10,000. [Paras 36, 37, 38, 39, 40]

Penalty imposed in excess of Rs.10,000 set aside; total penalty on the petitioner quantified at Rs.10,000.

Final Conclusion: Writ petition allowed in part: the orders of confiscation and penalty in excess of Rs.10,000 are set aside; confiscation vacated and redemption fine is not payable; the petitioner's liability is limited to a penalty of Rs.10,000; penalty on the individual director was left undisturbed as no writ was filed by him.

Detention and release of goods in transit - Mutatis mutandis application of CGST provisions under Section 20 of the IGST Act - Liability for transport of exempted goods under Section 129(1)(b) - Scope of the 4th proviso to Section 20 of the IGST Act - Distinction between 'penalty' and 'amount' under Section 129

Detention and release of goods in transit - Mutatis mutandis application of CGST provisions under Section 20 of the IGST Act - Liability for transport of exempted goods under Section 129(1)(b) - Scope of the 4th proviso to Section 20 of the IGST Act - Distinction between 'penalty' and 'amount' under Section 129 - Whether, in respect of interstate transportation of exempted goods detained under the IGST Act, an additional amount corresponding to SGST liability is payable in addition to the amount prescribed under Section 129(1)(b) of the CGST Act. - HELD THAT: - The power to detain goods in interstate transit arises under Section 20 of the IGST Act, which makes relevant provisions of the CGST Act applicable mutatis mutandis; the 4th proviso to Section 20 makes the IGST penalty the sum of penalties leviable under the CGST and SGST Acts only where tax/penalty liability under the IGST Act includes components under both CGST and SGST. Section 129(1)(b) of the CGST Act prescribes release of detained exempted goods on payment of an amount equal to 5% of the value of the goods or Rs.25,000, whichever is less. In the present case the goods were exempted and no tax liability arose under the IGST Act that would incorporate CGST and SGST components; consequently the 4th proviso is not attracted. The Court construed the legislature's distinct use of the words 'penalty' and 'amount' in Section 129 to indicate that the prescribed 'amount' for exempted goods is a civil liability recoverable under the CGST provision as made applicable by Section 20 of the IGST Act, and that there is no basis to impose a further similar amount under the SGST Act for interstate carriage of exempted goods. [Paras 4, 5, 6, 7]

The liability for release of detained interstate exempted goods is limited to the amount specified in Section 129(1)(b) of the CGST Act (5% of value of goods or Rs.25,000, whichever is less) and does not attract an additional similar amount under the SGST Act; review petition dismissed.

Final Conclusion: The Review Petition is dismissed; for interstate transportation of exempted goods detained under the IGST Act, only the release amount prescribed under Section 129(1)(b) of the CGST Act is payable and no further amount under the SGST Act is exigible.

Anticipatory bail - summons under the CGST Act - offence under Section 67(2) of the CGST Act - disposal of anticipatory bail application with direction to authority - compliance with the principle laid down in Special Civil Application No.13679 of 2019 dated 20.10.2020

Anticipatory bail - summons under the CGST Act - offence under Section 67(2) of the CGST Act - compliance with the principle laid down in Special Civil Application No.13679 of 2019 dated 20.10.2020 - Disposal of application under Section 438 CrPC seeking anticipatory bail in respect of summons issued under the CGST Act for alleged offence under Section 67(2). - HELD THAT: - The High Court heard learned counsel for the parties and, noting that the present application was filed in challenge to summons issued by the authority under the Act, directed that the authority concerned is expected to comply with the principle enunciated by this Court in Special Civil Application No.13679 of 2019 and allied matters dated 20.10.2020 in its true spirit. No interim grant of anticipatory bail is recorded in the order; the matter is disposed of with the expressed expectation that the authority will act in conformity with the cited precedent. The Court's direction is procedural in nature, calling for the authority's adherence to the Court's earlier guidance when proceeding pursuant to the summons.

Application disposed of with the observation that the authority shall comply with the principle laid down in Special Civil Application No.13679 of 2019 dated 20.10.2020.

Final Conclusion: The anticipatory bail application under Section 438 CrPC, filed against summons issued under the CGST Act for alleged offence under Section 67(2), is disposed of; the Court directed that the authority shall comply with the principle laid down in Special Civil Application No.13679 of 2019 dated 20.10.2020.

Opportunity of being heard - Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - refund of tax under the CGST Rules - principles of natural justice - remand for fresh consideration

Opportunity of being heard - Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - refund of tax under the CGST Rules - principles of natural justice - remand for fresh consideration - Whether the petitioner's refund application could be validly rejected without affording an opportunity of hearing as required by Rule 92(3) of the CGST Rules, 2017, and the consequence of non-compliance. - HELD THAT: - Rule 92(3) of the CGST Rules, 2017 mandates that where the proper officer is satisfied that refund (or part thereof) is not admissible, a notice in FORM GST RFD-08 must be issued, the applicant allowed to reply in FORM GST RFD-09 and, after considering the reply, an order sanctioning or rejecting the refund is to be made; the proviso expressly states that no application for refund shall be rejected without giving the applicant an opportunity of being heard. The record admitted that no hearing was afforded by the assessing officer before rejecting the refund claim. The Appellate Authority also recorded that no hearing had been granted, yet confirmed the rejection on merits without remanding for compliance with the mandatory hearing requirement, relying instead on non-compliance with a Board circular. Because the statutory requirement of affording an opportunity of hearing under Rule 92(3) is mandatory, both the order rejecting the refund and the appellate order confirming rejection without granting or remanding for hearing were rendered without application of mind to the said Rule. Consequently, the refund application must be considered afresh on merits after compliance with the statutory hearing requirement, and the matter must be remanded to the proper officer to pass fresh orders after affording a fair and personal hearing within the timeframe directed by the Court. [Paras 5, 6, 7, 8]

The impugned orders rejecting the refund application and confirming that rejection are quashed; the matter is remanded to the proper officer to decide the refund application afresh on merits after affording the petitioner a fair hearing, including personal hearing, within twelve weeks from receipt of the order.

Final Conclusion: The writ petition is allowed to the extent that the orders rejecting the refund claim and the appellate confirmation are quashed and the matter is remitted for fresh consideration; the second respondent shall decide the refund application on merits after granting the petitioner a fair hearing within twelve weeks, and the petition is disposed of with no costs.

Online information and database access or retrieval services (OIDAR) - classification of online gaming as service - place of supply for OIDAR services - export of services - conditions under IGST - reverse charge mechanism on import of services - taxability of supplies where both supplier and recipient are located in taxable territory - SAC 998439 - on-line contents not elsewhere specified - rate of GST on on-line content services - application of IGST under sections 5(3) and 5(4) of the IGST Act

Classification of online gaming as service - online information and database access or retrieval services (OIDAR) - Online gaming (the e-goods in issue) is to be treated as a service under the GST laws. - HELD THAT: - The Authority identified the services supplied by the applicant as falling within the definition of OIDAR in Section 2(17) of the IGST Act which expressly includes online gaming. Applying that definition to the facts as stated by the applicant, the Authority concluded that the subject supplies are services rather than goods. [Paras 5]

Online gaming is covered under services under the GST Act.

SAC 998439 - on-line contents not elsewhere specified - rate of GST on on-line content services - Classification and applicable rate: the services supplied (online gaming) fall under SAC 998439 and attract GST at 18%. - HELD THAT: - Relying on the Code-wise list in Notification No.11/2017-Central Tax (Rate), the Authority grouped the applicant's supply within the Heading 9984 'On-line Content Services' and specifically under code 998439 'Other On-line Contents Not Elsewhere specified'. The notification prescribes an 18% GST rate for services under Heading 9984, which the Authority applied to the subject supply. [Paras 5]

SAC 998439; GST rate 18%.

Reverse charge mechanism on import of services - application of IGST under sections 5(3) and 5(4) of the IGST Act - Where the applicant procures OIDAR services from suppliers located outside India, IGST is leviable under the reverse charge mechanism and the recipient in India must discharge the tax; IGST at 18% is applicable under sections 5(3) and 5(4). - HELD THAT: - The Authority observed that supplies from foreign suppliers to a business recipient in India constitute import of services for which reverse charge is triggered and the registered recipient is liable to pay GST under reverse charge. Applying its earlier conclusion on rate and classification, the Authority held that IGST at the rate applicable to the service (18%) would be payable under the reverse charge provisions. [Paras 5]

IGST is payable under reverse charge on procurement from foreign suppliers; IGST @ 18% applies under the cited IGST provisions.

Taxability of supplies where both supplier and recipient are located in taxable territory - consideration in determining taxability - Supplies to customers located in India are taxable regardless of the currency of payment; GST is leviable and the applicable rate and SAC remain as determined. - HELD THAT: - The Authority emphasized that when both supplier and recipient are located in the taxable territory, the transaction is taxable. The definition of 'consideration' contemplates payment in money; absent permissions to transact in foreign currency, payments in dollars do not convert a domestic supply into an export. Consequently, supplies to Indian customers attract GST under SAC 998439 at 18%. [Paras 5]

Supplies to Indian customers are subject to GST @ 18% under SAC 998439.

Taxability of supplies where both supplier and recipient are located in taxable territory - place of supply for OIDAR services - Where the customer is in India and payment is in Indian rupees, and the applicant is located in India, GST (CGST and SGST) is leviable on the supply even if delivery occurs from cloud servers outside India. - HELD THAT: - The Authority treated the supply as made from taxable territory to a recipient in taxable territory. It held that the location of storage or the physical location of cloud servers outside India does not alter the situs of supply when both supplier and recipient are in India; therefore CGST and SGST (or integrated treatment as applicable) must be discharged on such supplies. [Paras 5]

GST is leviable on supplies to Indian customers notwithstanding cloud servers being located outside India.

Place of supply for OIDAR services - export of services - conditions under IGST - Whether a particular supply to a recipient abroad qualifies as export (place of supply outside India) could not be answered by the Authority for want of facts; the question remains unanswered by this ruling. - HELD THAT: - Although the Authority set out the statutory tests for 'export of services' and the place of supply rules in Section 13 of the IGST Act (with Section 13(12) applicable to OIDAR services), it found the applicant had not furnished the factual particulars required by the Explanation to Section 13(12) (any two of seven non-contradictory conditions) to determine the recipient's location. The applicant also failed to attend hearings and did not provide the necessary details, rendering the Authority unable to conclude whether the place of supply is outside India and hence whether the supply is an export. [Paras 5]

Not answered due to absence of requisite factual information; determination of place of supply/export left open.

Final Conclusion: The Authority ruled that the applicant's online gaming supplies are services (OIDAR), classifiable under SAC 998439 and taxable at 18%; they are not exempt. Purchases of such services from foreign suppliers attract IGST under reverse charge payable by the Indian recipient (IGST @ 18%). Supplies to recipients located in India are taxable notwithstanding delivery from cloud servers outside India. The Authority declined to determine export status/place of supply for transactions involving foreign recipients for want of necessary factual particulars.

Passing on of benefit of input tax credit - reduction in rate of tax - Section 171(1) of the CGST Act, 2017 - ongoing project / project commencement date for applicability of anti-profiteering - works contract in real estate and applicability of anti-profiteering

Reduction in rate of tax - passing on of benefit of input tax credit - Whether there was a reduction in the rate of tax on the construction services in respect of the subject project that required passing on to the buyer. - HELD THAT: - The Authority examined the chronology and payments recorded in the ledger pertaining to the flat sold to Applicant No.1 and the timeline of events relating to the project. Although GST rates changed during the investigation period, the Authority concluded on the factual matrix that the project commenced after the introduction of GST and there was no basis to compare any pre-GST and post-GST prices for the same project. In consequence, the claim that a reduction in the rate of tax required a commensurate price adjustment for the applicant was not established on the material before the Authority. The determinative finding is that, for the impugned project, there was no operative circumstance entitling the applicant to a price recalibration on account of a reduction in rate of tax. [Paras 11, 12, 21, 22]

No reduction in rate of tax was found to require passing on to the applicant in the circumstances of this project.

Passing on of benefit of input tax credit - ongoing project / project commencement date for applicability of anti-profiteering - Whether the respondent had benefited from additional input tax credit (ITC) after introduction of GST and failed to pass such benefit to Applicant No.1. - HELD THAT: - The Authority analysed the benchmark events (licence, RERA registration, environment clearance, start of construction, draw of lots and builder-buyer agreement) and found that key activities relevant to the project's execution occurred after 01.07.2017. Because the project was not under execution in the pre-GST period, there was no comparable pre-GST ITC position against which to measure an additional benefit accruing to the respondent. Thus, there was no evidentiary foundation to conclude that the respondent obtained an additional ITC benefit that remained unpassed to the buyer. The Authority emphasised that absent a basis for comparison of ITC availability before and after 01.07.2017, the obligation to pass on additional ITC could not arise. [Paras 10, 16, 18, 21]

No additional benefit of ITC to the respondent was established; therefore there was no unpassed ITC benefit to be passed to Applicant No.1.

Section 171(1) of the CGST Act, 2017 - works contract in real estate and applicability of anti-profiteering - Whether the respondent contravened the provisions of Section 171(1) of the CGST Act, 2017 by not passing on the benefit of reduced tax or additional ITC to Applicant No.1. - HELD THAT: - Section 171(1) requires that a reduction in rate of tax or benefit of ITC be passed on to the recipient by way of a commensurate reduction in price. Applying the statutory test to the established facts - namely that the project commenced post-GST and there was no demonstrable additional ITC or applicable rate-reduction obligation vis-a -vis Applicant No.1 - the Authority held that the statutory condition for invoking Section 171(1) was not fulfilled. The Authority therefore found no contravention of Section 171(1) on the part of the respondent and dismissed the application. [Paras 13, 21, 22, 23]

The respondent did not contravene Section 171(1); the application alleging profiteering is dismissed.

Final Conclusion: On the material and chronology of events the Authority concluded that the impugned project was commenced after introduction of GST; no additional ITC benefit or applicable rate-reduction obligation was established vis-a -vis the applicant; accordingly Section 171(1) of the CGST Act, 2017 is not attracted and the application alleging profiteering is dismissed.

Classification under SAC 9994 (sewage and waste collection, treatment and disposal and sanitation services) - Pure services - Exemption under entry No.3 of Notification No.12/2017-C.T.(Rate) - services to Central/State/Union/local authority by way of activity in relation to functions entrusted under Article 243G/243W - Strict/ordinary interpretation of exemption notifications - Sub-contractor versus ultimate client - supply recipient test for exemption

Classification under SAC 9994 (sewage and waste collection, treatment and disposal and sanitation services) - Pure services - Classification of the applicant's supply of waste collection, segregation, treatment, transportation and disposal services under the Service Agreements with the concessionaires. - HELD THAT: - The Authority examined the contractual scope - daily door-to-door collection, segregation, support in transportation, street sweeping and related activities - and the explanatory notes to the Scheme of Classification of Services. Those activities fall within the groups and codes under SAC 9994, specifically waste collection services (999423/999424), waste preparation/consolidation (999431) and sweeping/cleaning services (999451). The Authority therefore held that the services supplied by the applicant are classifiable as 'Pure Services' under SAC 9994 in the Annexure to Notification No.11/2017-C.T.(Rate) dated 28.06.2017. [Paras 8, 10]

The supplies are classifiable under SAC 9994.

Exemption under entry No.3 of Notification No.12/2017-C.T.(Rate) - services to Central/State/Union/local authority by way of activity in relation to functions entrusted under Article 243G/243W - Sub-contractor versus ultimate client - supply recipient test for exemption - Strict/ordinary interpretation of exemption notifications - Whether the applicant's services are exempt from GST under entry No.3 of Notification No.12/2017-C.T.(Rate) dated 28.06.2017. - HELD THAT: - Entry No.3 provides exemption only for 'Pure services' provided to the specified class of recipients (Central/State/Union/local authority or Governmental authority) by way of an activity in relation to functions entrusted under Article 243G/243W. The Authority found that the applicant's contracts are with concessionaire companies (private SPVs) and not directly with the Greater Chennai Corporation; consequently the immediate recipient of the applicant's supply is not the class of recipient specified in the exemption entry. The Authority rejected the contention that a sub-contractor's supply must be treated as provided to the ultimate client merely because the work relates to municipal functions, noting that where the nature of supply by the main contractor and sub-contractor differ (DBFOT composite obligations of the concessionaire versus the applicant's 'pure services'), the exemption cannot be extended on a chain basis. Reliance on other AAR rulings was considered inapposite because advance rulings are fact-specific and the relevant prior rulings addressed different factual and legal entries (notably works contracts). Applying established principle that exemption notifications are to be construed strictly, the Authority held that all limbs of the entry (type of service, class of recipient and nature of activity) must be satisfied and they are not on the facts. Accordingly, the applicant's supplies are not eligible for exemption under entry No.3. [Paras 9, 10]

The services supplied by the applicant are not exempt under entry No.3 of Notification No.12/2017-C.T.(Rate).

Final Conclusion: The Authority ruled that the applicant's waste collection, segregation, treatment, transportation and disposal services are classifiable under SAC 9994; however, those services are not exempt under entry No.3 of Notification No.12/2017-C.T.(Rate) dated 28.06.2017 because the immediate recipient is the concessionaire companies and the conditions of the exemption entry are not satisfied.

Admissibility of additional evidence - Rule 29 of the ITAT Rules - application under Section 254(2) of the Income-tax Act - expeditious disposal of pending application - Vivad Se Vishwas amnesty scheme

Admissibility of additional evidence - Rule 29 of the ITAT Rules - Whether the Tribunal erred in failing to adjudicate upon the admissibility and consider the additional evidence furnished by the appellant under Rule 29 of the ITAT Rules. - HELD THAT: - The High Court admitted the appeal on the stated question of law that the Tribunal did not decide the appellant's application for additional evidence under Rule 29. The Court noted that the appellant had also filed an application under Section 254(2), but observed that asking this Court to refrain from hearing the appeal until the Tribunal disposes the Section 254(2) application would defeat justice because the appellant seeks to avail the Vivad Se Vishwas amnesty scheme, which was time-bound. The Court declined to issue a direction to the Tribunal to expedite disposal of the Section 254(2) application but found it appropriate to call for the Tribunal record to enable this Court to consider the admitted question on the merits on an expedited basis.

Appeal admitted on the question whether the Tribunal erred in not adjudicating the Rule 29 application; record of the ITAT matter summoned for urgent hearing.

Application under Section 254(2) of the Income-tax Act - expeditious disposal of pending application - Vivad Se Vishwas amnesty scheme - Whether this Court should direct the Tribunal to expedite disposal of the appellant's application under Section 254(2) in view of the appellant's intention to avail the Vivad Se Vishwas scheme. - HELD THAT: - The Court observed competing positions: the appellant sought expedition because of the amnesty scheme deadline, while the respondent contended this Court could not direct the Tribunal to expedite disposal. The Court refused to command the Tribunal to expedite the Section 254(2) application but accepted that the appeal could not be kept pending indefinitely; accordingly the Court directed the Registry to summon the ITAT record urgently and listed the appeal for immediate hearing so that the admitted question may be considered before the Vivad Se Vishwas deadline.

No direct order to the Tribunal to expedite disposal of the Section 254(2) application; instead the ITAT record was summoned and the appeal listed for urgent hearing to facilitate resolution before the amnesty scheme deadline.

Final Conclusion: The High Court admitted the appeal on the question whether the Tribunal failed to adjudicate the Rule 29 application, summoned the ITAT record in ITA No. 3613/Del/2015 (AY 2011-12) for urgent production, declined to direct the Tribunal itself to expedite disposal of the Section 254(2) application, and listed the matter for immediate hearing to enable determination before the Vivad Se Vishwas deadline.

Agricultural character of land - Exemption of agricultural income versus taxation as capital gains - Classification in revenue records vis-a -vis actual user - Factors determining agricultural character (Sarifabibi test) - Onus of proof when classification is contested - Short holding period and sale to non agriculturist as relevant indicia - Adventure in the nature of trade / intention to sell

Agricultural character of land - Factors determining agricultural character (Sarifabibi test) - Classification in revenue records vis-a -vis actual user - Onus of proof when classification is contested - Short holding period and sale to non agriculturist as relevant indicia - Whether the land sold by the assessee was agricultural land exempt under the Act or a capital asset liable to capital gains tax - HELD THAT: - The Court applied the thirteen indicia laid down in Smt. Sarifabibi Mohmed Ibrahim to the facts and recorded their answers to the relevant factors. The revenue record showing agricultural classification was not conclusive; actual use, surrounding development, holding period, and transfer to a non agriculturist for non agricultural purpose were material indicia. The assessing officer, after issuing questionnaires and noting lack of cooperative evidence from the assessee, found no material to support agricultural user; the lands were held only for about one year and were transferred to a company for development of an SEZ. The assessee failed to substantiate the claimed agricultural operations or to rebut the material relied on by the revenue. Once the revenue challenged the classification and adduced relevant material, onus shifted to the assessee which was not discharged. The Tribunal erred in treating the entry in revenue records as decisive and in failing to balance the totality of circumstances under the Sarifabibi factors. On that application of law to facts, the Court concluded that the lands were not agricultural and constituted capital asset(s) chargeable to capital gains. [Paras 7, 9, 10, 12, 16]

The Tribunal's order holding the land to be agricultural is set aside; the assessment treating the land as a capital asset liable to capital gains is restored.

Final Conclusion: The Revenue's appeal is allowed; the impugned Tribunal order is set aside and the substantial questions of law are answered in favour of the Revenue, holding the land to be a capital asset and not agricultural land for the assessment year 2008-2009.

Recall of ex parte order - sufficient cause for non appearance - Rule 25 of the Income Tax (Appellate Tribunal) Rules, 1963 - Section 254(2) of the Income tax Act, 1961 - scope of enquiry on an application under Rule 25 - restoration of appeal - Vivad Se Vishwas scheme - undertaking as factor in discretionary relief

Recall of ex parte order - sufficient cause for non appearance - Rule 25 of the Income Tax (Appellate Tribunal) Rules, 1963 - scope of enquiry on an application under Rule 25 - Whether the ITAT erred in dismissing the Miscellaneous Application under Section 254(2) read with Rule 25 seeking to set aside the ex parte final order and restore the appeal. - HELD THAT: - The Court found that the petitioner had filed affidavits explaining non appearance on account of illness of the authorised representative and that these explanations disclosed sufficient cause. The Tribunal rejected the Miscellaneous Application mainly on the basis of prior adjournments, lapse of time since first listing and by examining the merits of the ex parte order. The High Court held that such factors could not be treated in isolation and that the sole inquiry under Rule 25 is whether sufficient cause is shown for non appearance. The Tribunal erred in going into the correctness of the ex parte decision and in requiring the petitioner to demonstrate factual errors in the order. Having accepted that sufficient cause was made out, the Court concluded that the Tribunal was obligated to set aside the ex parte order and restore the appeal. The petitioner's contemporaneous affidavits and further affidavits explaining sudden illness were held to be cogent and germane to the Rule 25 inquiry. [Paras 10, 11, 13]

Impugned order dismissing the Miscellaneous Application was set aside and the ex parte order was recalled; the appeal before the ITAT was restored to its original number.

Vivad Se Vishwas scheme - undertaking as factor in discretionary relief - restoration of appeal - Whether the petitioner's undertaking to apply under the Vivad Se Vishwas scheme could be taken into account in granting relief of restoration of the appeal. - HELD THAT: - The Court recorded the petitioner's undertaking to avail the Vivad Se Vishwas scheme if the appeal was restored, took that undertaking on record and treated it as a binding commitment. In view of the accepted sufficient cause and the undertaking to settle the dispute under the scheme, the Court was persuaded to allow the petition and order restoration. [Paras 12, 13]

Petitioner's undertaking to apply under the Vivad Se Vishwas scheme accepted; taken into account in granting the discretionary relief of restoring the appeal.

Final Conclusion: The petition is allowed: the ITAT order dated 06.11.2020 dismissing M.A. No.742/DEL/2018 and the ex parte order dated 24.07.2018 in ITA No.2297/DEL/2014 are set aside and the Revenue's appeal is restored to ITA No. 2297/DEL/2014; the petitioner's undertaking to apply under the Vivad Se Vishwas scheme is recorded and accepted.

Fair market value deemed to be full value of consideration - Applicability of deeming provision where actual consideration is ascertainable - Transfer of booking/right to purchase and non-applicability of deeming provisions for land or building - Disallowance under section 14A and computation of book profit under section 115JB

Fair market value deemed to be full value of consideration - Applicability of deeming provision where actual consideration is ascertainable - Whether the Assessing Officer was justified in invoking section 50D to compute capital gains by adopting fair market value where the assessee produced evidence of agreed sale consideration for transfer of booking rights in two flats. - HELD THAT: - The Tribunal found that, although the affidavits evidencing the transfers did not themselves state the consideration, the assessee produced copies of accounts and bank records showing the agreed sale consideration which the assessee had used to compute and disclose the short-term capital gains in its return. The authorities below neither made any inquiry from the transferees nor validly rejected the documentary evidence produced. On the facts, the consideration was ascertainable and therefore the deeming provision could not be invoked. Consequently the addition made by applying section 50D by adopting fair market values was unsustainable and was deleted. [Paras 8]

Addition made by invoking section 50D was deleted; section 50D not applicable where consideration was ascertainable from documents produced and relied upon by the assessee.

Disallowance under section 14A and computation of book profit under section 115JB - Whether the disallowance under section 14A should be included while computing book profit under section 115JB for the purpose of MAT. - HELD THAT: - The Tribunal noted that the limited relief sought was confined to excluding the section 14A disallowance from the computation of book profit under section 115JB. Applying the ratio of binding precedents including the Special Bench decision relied upon, the Tribunal directed the Assessing Officer to delete the addition made under section 14A for the purpose of computing book profit under section 115JB. [Paras 9]

Disallowance under section 14A shall not be added while computing book profit under section 115JB; the Assessing Officer directed to delete the addition for MAT computation.

Final Conclusion: Appeal allowed: impugned addition under section 50D deleted as consideration was ascertainable from documents produced and declared by the assessee; disallowance under section 14A excluded from book profit for computation under section 115JB.

Treatment of optionally and compulsorily convertible debentures as equity - recharacterization of debt as equity - arm's length price - shareholder activity - transfer pricing - thin capitalization - general anti-avoidance rule (GAAR)

Treatment of optionally and compulsorily convertible debentures as equity - recharacterization of debt as equity - thin capitalization - shareholder activity - Whether the debentures issued by the assessee to associated enterprises could be recharacterized as equity and interest thereon disallowed - HELD THAT: - The Tribunal examined the nature and commercial substance of the transactions and followed the earlier Pune Bench decision in M/s. Kolte Patil Developers Ltd. The authorities below had recharacterized the debentures as equity relying on thin capitalization concepts, GAAR and OECD "shareholder activity" notions. The Tribunal noted that specific domestic thin capitalization rules (section 94B) and GAAR were enacted prospectively w.e.f. 01.04.2018 and thus were not available for the assessment year 2013-14. Chapter X requiring determination of arm's length price focuses on pricing of the transaction entered into and does not mandate changing the character of the transaction except where specific anti-avoidance provisions apply. The OECD examples of shareholder activities did not fit the facts because the assessee had raised funds by issuance of debentures which were reflected as such and were redeemed; there was no evidence that funds were intended to be equity in substance. In these circumstances the TPO/AO could not recharacterize genuine borrowings into equity for the relevant year, and the grounds challenging the recharacterization were accepted in favour of the assessee.

Grounds challenging the treatment of the OCDs/CCDs as equity are allowed and the recharacterization by the TPO/AO is set aside.

Arm's length price - transfer pricing - Whether the Arm's Length Price (ALP) of the interest paid by the assessee is correctly determined by the authorities - HELD THAT: - The Tribunal found that determination of ALP required fresh consideration on the merits. Having set aside the recharacterization issue, the Tribunal directed that ALP be freshly determined by the TPO/AO after complying with the principles of natural justice. The order of the Ld. CIT(A) on ALP was therefore restored to the file for reconsideration and fresh determination in accordance with law and procedure.

ALP determination is remanded to the TPO/AO for fresh adjudication after giving parties an opportunity of being heard.

Final Conclusion: The appeal is partly allowed: the challenge to recharacterisation of the debentures as equity is allowed in favour of the assessee; the question of ALP is remanded to the TPO/AO for fresh determination after compliance with natural justice.

Transfer pricing - selection and exclusion of comparable uncontrolled companies - functional comparability - government-controlled enterprises as non-comparables - working capital adjustment and treatment of foreign exchange gain/loss - interest on delayed realization of receivables as an international transaction - judicial precedent and binding effect of earlier orders

Transfer pricing - selection and exclusion of comparable uncontrolled companies - functional comparability - government-controlled enterprises as non-comparables - Exclusion of certain companies from the final set of comparables for benchmarking the engineering design and related services international transaction. - HELD THAT: - The Tribunal examined the functional profile and annual report disclosures of the companies challenged by the assessee. Certification Engineering International Ltd. (CEIL) was found to carry out certification, third-party inspection, safety audits and related activities, and its order book and revenue mix show reliance on such services, making its functions dissimilar to the assessee's engineering design and drawing services; additionally CEIL is a wholly-owned subsidiary of a government enterprise. HSCC India Ltd.'s primary income from consultancy in healthcare facility design, project management and procurement - and its reliance on government contracts - rendered it functionally dissimilar and government-controlled, therefore non-comparable. Mitcon Consultancy & Engineering Services Ltd. earned significant revenue from vocational and training activities and other consultancy streams distinct from the assessee's core engineering design activity, and had substantial government-affiliated shareholding; on functional and government-affiliation grounds it was held not comparable. The Tribunal followed its earlier findings in the assessee's prior years where government-controlled enterprises and functionally dissimilar entities were excluded, and directed the AO/TPO to exclude these companies from the final comparable set. The Tribunal recorded that, because exclusion of these comparables affects the statistical outcome, the related grounds (1-4) are allowed for statistical purposes. [Paras 7, 8, 9, 10]

CEIL, HSCC India Ltd. and Mitcon Consultancy & Engineering Services Ltd. are excluded from the final set of comparables; grounds 1-4 are allowed for statistical purposes.

Interest on delayed realization of receivables as an international transaction - working capital adjustment and treatment of receivables - judicial precedent and binding effect of earlier orders - Whether a separate transfer pricing adjustment for interest on delayed receivables should be sustained for the year under consideration. - HELD THAT: - The TPO had recharacterised delayed receivables as unsecured loans and benchmarked interest using an external rate. The DRP relied on later Tribunal decisions which, having regard to the Explanation to section 92B (Finance Act, 2012), treated delayed receivables as an international transaction requiring separate benchmarking; the DRP directed computation on LIBOR+400 bps. However, the Tribunal examined the chain of authorities in the assessee's own earlier years: the Tribunal and the Delhi High Court had earlier held for AY 2010-11 that no separate interest adjustment was warranted where the assessee was debt-free and working capital adjustment had been allowed. The Supreme Court subsequently dismissed the Revenue's special leave petition in respect of that earlier year, upholding the factual finding that no separate interest adjustment arose. In view of that subsequent Supreme Court dismissal (which post-dated the contrary Tribunal decision relied on by the DRP), the Tribunal directed deletion of the interest-on-receivables adjustment for the year under appeal. [Paras 11]

Transfer pricing adjustment on account of interest on receivables is deleted; ground 5 is allowed.

Segmental accounts and allocation keys - statistical effect of comparable set on margin - Whether the Tribunal should adjudicate the correctness of the assessee's segmental allocation methodology for computing the engineering design segment margin. - HELD THAT: - The assessee argued that adopting its allocation keys (hours, payroll, headcount) would yield a margin obviating adjustment. The Tribunal observed that, given its directions to exclude three comparables, the assessee's margin would, in any event, be at par with the comparables and no adjustment would follow even if the AO/TPO's revenue-based allocation were sustained. Consequently the contention on segmental allocation became academic. The Tribunal therefore declined to adjudicate afresh on the allocation methodology and treated the ground as infructuous. [Paras 12]

Ground relating to segmental accounts is dismissed as infructuous; no adjudication on allocation methodology undertaken.

Final Conclusion: The appeal is allowed in part: the Tribunal directed exclusion of CEIL, HSCC India Ltd. and Mitcon from the final comparable set and ordered deletion of the transfer pricing adjustment for interest on receivables; the challenge to segmental allocation was held academic and dismissed as infructuous, and overall the assessee's appeal is allowed partly for statistical purposes.

Rectification of mistake apparent on the record - limits of exercise of power under section 254(2) of the Income-tax Act - mistake apparent must be obvious and patent and not a debatable point of law - inadmissibility of review of merits under rectification jurisdiction - admission of additional grounds requiring factual determination

Rectification of mistake apparent on the record - limits of exercise of power under section 254(2) of the Income-tax Act - Whether the Tribunal could rectify alleged omissions or errors in its previous order under section 254(2) by re opening or reviewing debatable points of law or re adjudicating grounds raised in the appeal. - HELD THAT: - The Tribunal applied the settled test that a mistake apparent on the record must be obvious and patent and not one which requires a long drawn process of reasoning or involves a debatable point of law. Reliance was placed on the principle in T.S. Balaram that rectification cannot be used as a vehicle to review merits. Applying that principle, the Tribunal examined the miscellaneous application and concluded that the matters raised involved questions on which the bench had taken a particular view in its order and therefore did not amount to mistakes apparent from the record capable of rectification under section 254(2). [Paras 3, 5]

Rectification petition dismissed to the extent it sought re examination or review of debatable points and alleged omissions that in fact reflected the Tribunal's chosen mode of disposing the grounds; such matters are not rectifiable under section 254(2).

Adjudication of grounds of appeal - Whether grounds nos. 2(b), 2(c), 2(h) and 2(i) were omitted from adjudication by the Tribunal. - HELD THAT: - The Tribunal found that grounds 2(a) to 2(d) (including 2(b) and 2(c)) were combined and adjudicated in paragraph 7 of its earlier order, and that grounds 2(h) and 2(i) were dealt with in paragraph 9. The bench held that the manner of disposal reflected an exercise of judicial choice and therefore could not be treated as an omission or a mistake apparent on the record for rectification under section 254(2). [Paras 5]

Allegation of omission to adjudicate these grounds rejected; the Tribunal had adjudicated them and no rectification under section 254(2) was warranted.

Requirements for raising issues by grounds of appeal - Whether failure to decide on a comparable (M/s South India Surgical Limited) constituted a mistake apparent on the record. - HELD THAT: - The Tribunal observed that no specific ground was raised before it concerning South India Surgical Limited; the party's assertion that the comparable was argued orally did not constitute an omission apparent on the record. Because the absence of any ground on the record meant the point was not presented for adjudication, the contention could not be sustained as a rectifiable mistake under section 254(2). [Paras 6]

Claim that the Tribunal omitted to decide on that comparable rejected; not a mistake apparent on the record.

Admission of additional grounds requiring factual determination - Whether the Tribunal erred in refusing to admit two additional grounds relating to working capital adjustment and marketing/AMP adjustments. - HELD THAT: - The Tribunal recorded its view that the additional grounds could not be admitted because they required factual adjudication rather than determination of pure questions of law. The applicants' contention that the Tribunal failed to give reasons or consider precedents was examined and the bench concluded that its view on admission was a discretionary judicial decision and not a mistake apparent on the record amenable to correction under section 254(2). [Paras 7]

Refusal to admit the additional grounds upheld; not open to rectification under section 254(2).

Final Conclusion: The miscellaneous application praying for rectification of the Tribunal's order was dismissed: the matters raised involved debatable points, choices of adjudication, or issues not raised as grounds of appeal, and therefore did not constitute mistakes apparent on the record that could be corrected under section 254(2) of the Act.

Foreign tax credit under Article 23(2)(a) of the Indo-Japanese Double Taxation Avoidance Agreement - taxability under Article 12 (royalties and fees for technical services) vis-a -vis Article 14 (independent personal services) - exclusion in Article 12(4) limited to payments to individuals - treaty interpretation - read the convention as a whole and harmoniously - generalia specialibus non derogant (general provisions yield to specific provisions) - fixed base / permanent establishment requirement for taxation under Article 14 - reasonableness and bona fide view of source jurisdiction in determining conformity with the Convention

Foreign tax credit under Article 23(2)(a) of the Indo-Japanese Double Taxation Avoidance Agreement - taxability under Article 12 (royalties and fees for technical services) vis-a -vis Article 14 (independent personal services) - exclusion in Article 12(4) limited to payments to individuals - treaty interpretation - read the convention as a whole and harmoniously - reasonableness and bona fide view of source jurisdiction in determining conformity with the Convention - Admissibility of foreign tax credit for taxes withheld in Japan on professional fees paid to the assessee. - HELD THAT: - The Tribunal held that Article 23(2)(a) entitles an Indian resident to relief where income "in accordance with the provisions of this Convention" may be taxed in Japan, and that the Assessing Officer may decline credit if taxes withheld abroad are not in harmony with the treaty. On the facts, the Tribunal construed Articles 12 and 14 together and concluded that the exclusion in Article 12(4) applies only to payments to individuals; Article 14 (independent personal services) therefore does not, under this treaty, displace Article 12 for non individuals such as a partnership firm. Reading the treaty as a whole and applying the principle that specific provisions govern individuals, the Tribunal found it reasonably possible and not unreasonable for Japanese authorities to treat the professional fees paid to the partnership as taxable under Article 12. Further, where a source jurisdiction has taken a bona fide and not "manifestly erroneous" view in taxing under a different article, the residence state may still grant credit. Applying these legal principles to the material, the Tribunal concluded that the taxes withheld in Japan were in conformity with the Convention for the purposes of Article 23(2)(a) and that the assessee was wrongly denied the foreign tax credit. [Paras 5, 6, 7, 9, 10]

Credit for the taxes withheld in Japan (claimed under Article 23(2)(a)) is admissible; the Assessing Officer is directed to grant the tax credit.

Alternate claim for deduction in computation of income - Whether the assessee should alternatively be allowed a deduction for the taxes withheld in Japan in computing professional income. - HELD THAT: - Having upheld the admissibility of the foreign tax credit on the merits, the Tribunal found it unnecessary to adjudicate the alternate plea for deduction and did not decide that contention. [Paras 9]

Alternate plea for deduction not adjudicated as unnecessary in view of allowance of foreign tax credit.

Final Conclusion: Appeal allowed: on the construction of the Indo-Japanese tax treaty and having regard to the reasonableness of the source jurisdiction's view, the taxes withheld in Japan on the assessee's professional fees were held to be taxable "in accordance with the provisions of the Convention," and the Assessing Officer is directed to grant the foreign tax credit for assessment year 2014-15; alternate deduction claim not adjudicated.

Reopening of assessment - borrowed satisfaction - disposal of objections prior to reassessment - principle of natural justice - accommodation entries in guise of share capital/share premium - addition under section 68 of the Income tax Act - application of mind in recording reasons for reopening - quashing reassessment for invalid reasons

Reopening of assessment - borrowed satisfaction - disposal of objections prior to reassessment - application of mind in recording reasons for reopening - principle of natural justice - Validity of reopening assessment under notice dated 11.3.2016 (sections 147/148) and propriety of disposing objections only in the composite assessment order without a separate order. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the manner in which the assessee's objections were handled. It noted that the objections filed by the assessee were not disposed of by a separate order prior to completion of reassessment, and that the reasons recorded relied on Investigation Wing material without adequate verification, reflected inconsistent figures (reasons referring to Rs. 60 lakhs while addition was finally Rs. 50 lakhs) and thus evidenced lack of independent application of mind. Following the legal principle that reopening based on incorrect, non verified or borrowed material and where objections are not separately disposed of is vitiated, the Tribunal held that the reassessment was invalid and liable to be quashed. [Paras 5]

Reopening of assessment quashed; reassessment proceedings set aside for want of valid reasons and failure to dispose objections separately.

Accommodation entries in guise of share capital/share premium - addition under section 68 of the Income tax Act - quashing reassessment for invalid reasons - Sustenance of addition made under section 68 treating alleged share application money/share premium as accommodation entries and whether such addition survives after quashing reopening. - HELD THAT: - The Tribunal considered the Assessing Officer's conclusion that amounts received as share capital/share premium were accommodation entries and the appellate authority's confirmation of the addition. However, because the reopening itself was held to be based on defective reasons and without proper application of mind (and objections were not independently disposed of), the foundation for invoking section 68 was vitiated. The Tribunal therefore deleted the addition by quashing the reassessment and consequent addition. [Paras 5, 6]

Addition under section 68 deleted as the reassessment was quashed; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2009-10, quashed the reopening of assessment and set aside the addition made under section 68 treating alleged accommodation entries as share capital/share premium, and deleted the disputed addition.

Disallowance under section 14A - apportionment of expenditure between taxable and non-taxable income - application of Rule 8D - disallowance computed on average value of stock-in-trade - exempt dividend income

Disallowance under section 14A - exempt dividend income - application of Rule 8D - Whether expenditure attributable to exempt dividend income earned by the assessee is liable to disallowance under section 14A. - HELD THAT: - The Tribunal followed the Supreme Court's decision in Maxopp Investment Ltd., holding that expenditure incurred "in relation to" exempt income must be disallowed under section 14A. The dominant-purpose test was rejected as the determinative inquiry is whether expenditure has a causal connection with exempt income; where such connection exists, the relevant portion of expenditure is to be disallowed. The Tribunal applied that principle to the facts that the assessee admittedly earned dividend income and incurred administrative, operative and share trading expenses, concluding that disallowance under section 14A is attracted to the extent expenditure is attributable to the exempt dividend income. [Paras 7, 9]

Disallowance under section 14A is applicable to expenditure attributable to the exempt dividend income earned by the assessee; Maxopp Investment Ltd. governs this conclusion.

Apportionment of expenditure between taxable and non-taxable income - disallowance computed on average value of stock-in-trade - application of Rule 8D - Whether the AO was entitled to compute disallowance by applying Rule 8D(2)(iii) on the average value of stock-in-trade, or whether apportionment of expenditure between strategic and non-strategic investments is required. - HELD THAT: - On the material before it, the Tribunal held that apportionment of expenditure is the appropriate principle where dividend is earned in circumstances involving both investments and trading activity. The Tribunal found that applying Rule 8D(2)(iii) on the average value of stock-in-trade (as done by the AO) was not appropriate in the present case, given the need to segregate expenditure relating to strategic and non-strategic investments. Consequently, the Tribunal directed the AO to recompute disallowance by apportioning the expenditure attributable to exempt income and segregating amounts relating to strategic (investment) and non-strategic (trading) shares. [Paras 6, 9]

AO directed to withdraw the flat application of Rule 8D(2)(iii) on average stock-in-trade value and to compute disallowance by apportioning expenditure between amounts attributable to exempt dividend income and other business expenditure, segregating strategic and non-strategic investment-related expenditure.

Final Conclusion: Appeal partly allowed: the Tribunal upheld that section 14A applies to expenditure attributable to the exempt dividend income but set aside the AO's method of computing disallowance on average stock-in-trade; the matter is remitted to the AO for recomputation by apportioning expenditure between exempt dividend income and other business expenditure, segregating strategic and non-strategic investment-related expenditure.

Disallowance under Section 40(a)(ia) for failure to deduct tax at source - second proviso to Section 40(a)(ia) - clarificatory/retrospective effect - computation of capital gains on demolition of a depreciable asset under Section 50(2)

Disallowance under Section 40(a)(ia) for failure to deduct tax at source - second proviso to Section 40(a)(ia) - clarificatory/retrospective effect - Whether disallowance under Section 40(a)(ia) for interest not subjected to TDS could be sustained where the payee included the interest in its return and the second proviso to Section 40(a)(ia) has retrospective/clarificatory effect. - HELD THAT: - The Tribunal affirmed the appellate authority's conclusion that no disallowance could be made in the hands of the assessee because the payee had included the interest income in its total income and filed the return. The CIT(A) relied on Tribunal decisions and the Hon'ble Delhi High Court ruling that the second proviso to Section 40(a)(ia) is declaratory/curative and operates retrospectively from 1.4.2005, thereby precluding disallowance in such circumstances. The Revenue did not point to any contrary binding decision or establish error in the CIT(A)'s reasoning. On that basis the Tribunal found no reason to interfere with the deletion of the disallowance. [Paras 10]

Disallowance under Section 40(a)(ia) deleted; revenue ground dismissed.

Computation of capital gains on demolition of a depreciable asset under Section 50(2) - Whether the written down value of a demolished building (being the only asset in the block) could be claimed as a short-term capital loss under Section 50(2). - HELD THAT: - The CIT(A) accepted the assessee's account treatment: the building was purchased with the land, cost apportioned, the building shown under fixed assets and depreciation claimed, and on demolition the WDV was written off and claimed as short-term capital loss. Section 50(2) provides special computation for transfer or cessation of depreciable assets; where the only asset in the block ceases to exist, the WDV may be treated as capital loss under the section. The AO's objection that there was no transfer was held not to preclude application of Section 50(2) in the circumstances. Revenue did not demonstrate any flaw in the CIT(A)'s application of Section 50(2) or cite any binding contrary authority, and the Tribunal saw no reason to interfere. [Paras 15]

Short-term capital loss on demolition of the building allowed and disallowance deleted; revenue ground dismissed.

Final Conclusion: Both grounds of the revenue appeal were dismissed and the assessment order as modified by the CIT(A) was upheld; the appeal of the revenue is dismissed.

Registration under section 12A - registration under section 80G(5) - objects as per memorandum of association - genuineness of activities - once 12A registration granted, 80G approval cannot be denied unless activities are not genuine - CIT examining 80G application is not to act as Assessing Officer

Registration under section 12A - registration under section 80G(5) - objects as per memorandum of association - genuineness of activities - CIT examining 80G application is not to act as Assessing Officer - Whether the Commissioner (Exemption) was justified in refusing registration under section 80G(5) notwithstanding that registration under section 12A had been granted and the assessee had incurred expenditures in health, education and relief to poor which fall within its object clause - HELD THAT: - The Tribunal found it undisputed that the assessee held registration under section 12A granted on 08.02.2019 and that the registration certificate recorded the purposes as religious and general public utility. Examination of the memorandum of association, however, showed main objects at serial nos. 2 and 3 for promotion of hospitals/medical and for establishing, maintaining and running schools and colleges. The Commissioner (Exemption) rejected the 80G application on the basis that the 12A registration recorded religious or general public utility purposes and on an observation that activities were at a nominal scale, but ignored the object clauses and recorded expenditures towards health, education and help to poor. The Tribunal observed that once registration under section 12A is granted, approval under section 80G(5) ordinarily cannot be refused unless the activities are not genuine; the Commissioner had made no adverse finding on genuineness. Reliance was placed on consistent judicial precedents holding that the authority deciding 80G certification need only examine whether the institution is registered under section 12A and the objects of the trust, and is not to act as an Assessing Officer entailing detailed inquiry into income or quantum of activities. Applying these principles, the Tribunal concluded that the Commissioner erred in dismissing the 80G application and directed grant of registration under section 80G(5). [Paras 4, 5]

The order refusing registration under section 80G(5) is set aside and the Commissioner (Exemption) is directed to grant registration under section 80G(5).

Final Conclusion: The appeal is allowed; the Tribunal sets aside the refusal and directs the revenue authority to grant registration under section 80G(5) in view of the existing 12A registration, the assessee's objects covering health and education and absence of any finding against genuineness of activities.

Revenue expenditure - capital expenditure - tenancy agreement - Maharashtra Rent Control Act, 1999 - nexus between expenditure and income - going concern - remand for fresh adjudication

Revenue expenditure - capital expenditure - tenancy agreement - Maharashtra Rent Control Act, 1999 - Allowability of stamp duty and registration charges paid on registration of a tenancy agreement - HELD THAT: - The Assessing Officer and the Commissioner (Appeals) treated stamp duty and registration charges as capital expenditure on the premise that the tenancy granted to the assessee conferred a perpetual or enduring right. The Tribunal examined the registered tenancy agreement dated 18th March 2013 and the surrounding factual matrix and noted that the agreement confers the status and obligations of a monthly tenant: payment of monthly rent, liability for statutory dues where billed, prohibition on alterations without the landlord's consent, right of landlord/representative to inspect, and landlord's entitlement to revoke tenancy on breach. The tenancy agreement was executed and registered under the Maharashtra Rent Control Act, 1999. These terms indicate retention of right, title and interest by the landlord and do not evidence any transfer of property or a perpetual tenancy right. Reliance on a board resolution alleging a "forever tenancy right" was held to be inconsistent with the express terms of the executed tenancy agreement. Consequently, the stamp duty and registration charges incurred for registration of the tenancy agreement are revenue in nature and deductible; the addition is to be deleted. [Paras 8]

Expenditure towards stamp duty and registration charges for the tenancy agreement is revenue in nature and allowable; deletion of the addition relating thereto.

Nexus between expenditure and income - going concern - remand for fresh adjudication - Disallowance of other claimed business expenditures on the ground that the assessee's chemical business had ceased - HELD THAT: - The Assessing Officer disallowed various expenses on the basis that the assessee's earlier chemical/manufacturing business was no longer in existence and therefore the expenditures lacked nexus with the assessee's interest income. The assessee contended that business activities were only temporarily suspended and that it intends to restart operations, asserting that the expenditures were incurred to maintain the business as a going concern. The Tribunal held that if the assessee can produce sufficient evidence to establish that the business has not been permanently closed and that the expenditures relate to a continuing business, such expenditures should be allowed. Because the factual contention requires verification and evidence was not finally adjudicated, the Tribunal directed that this issue be restored to the Assessing Officer for fresh adjudication after affording the assessee a reasonable opportunity of hearing. [Paras 13]

Matter remanded to the Assessing Officer for fresh adjudication on merits after allowing the assessee an opportunity to establish that the business was not permanently closed and that the expenditures bear requisite nexus.

Final Conclusion: Appeal partly allowed: the disallowance of stamp duty and registration charges is deleted as those expenses are revenue in nature; the separate disallowance of other business expenditures is remitted to the Assessing Officer for fresh consideration on merits after giving the assessee an opportunity of hearing.

Characterisation of carriage fees/channel placement fees as work or royalty for TDS purposes - application of specific TDS provision over general provision (Explanation III to section 194C vis-a -vis section 194J) - disallowance under section 40(a)(ia) for short deduction of TDS - classification of editing charges as fees for professional services versus contract payments - burden of proof for deduction of commission expenses and deletability of disallowance where books not rejected

Characterisation of carriage fees/channel placement fees as work or royalty for TDS purposes - application of specific TDS provision over general provision (Explanation III to section 194C vis-a -vis section 194J) - disallowance under section 40(a)(ia) for short deduction of TDS - Deletion of disallowance under section 40(a)(ia) in respect of carriage fees/channel placement fees on the ground that TDS was deducted under the incorrect provision - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the disallowance made by the Assessing Officer who had treated carriage/placement fees as 'royalty' attracting section 194J. The CIT(A) followed the Tribunal's earlier decisions in the assessee's own case and relevant High Court authority holding that payments for broadcasting/telecasting (including placement of channels) fall within the definition of 'work' in Explanation III to section 194C and thereby attract the specific provision (section 194C) introduced contemporaneously. The Tribunal applied the principle that when a specific provision relating to an activity (broadcasting/telecasting) exists alongside a more general provision, the specific provision governs. Further, coordinate-bench precedents were followed to hold that where there is a short deduction (TDS deducted under one provision at a lower rate instead of a higher rate under another provision), section 40(a)(ia) does not mandate disallowance. On these bases the Tribunal found no infirmity in deleting the disallowance. [Paras 6, 7, 13]

Order of the CIT(A) deleting the disallowance under section 40(a)(ia) in respect of carriage/channel placement fees is sustained and the revenue's grounds are dismissed.

Classification of editing charges as fees for professional services versus contract payments - disallowance under section 40(a)(ia) for short deduction of TDS - Deletion of disallowance under section 40(a)(ia) in respect of editing expenses where TDS was deducted at a lower rate under a different provision - HELD THAT: - The Assessing Officer disallowed editing expenses because TDS was deducted at 2% under section 194C instead of 10% under section 194J. The CIT(A) deleted the disallowance relying on High Court and Tribunal decisions (including S.K. Tekriwal and coordinate-bench precedents) holding that section 40(a)(ia) does not apply to cases of short deduction of TDS. The Tribunal followed these coordinate-bench decisions (including Sapiens Technologies and other precedents) which uniformly held that a shortfall in deduction, as distinct from complete non-deduction, does not attract disallowance under section 40(a)(ia). Applying that ratio to the facts (short deduction), the Tribunal sustained deletion of the addition. [Paras 11, 12]

Deletion of the disallowance under section 40(a)(ia) in respect of editing expenses is sustained and the revenue's ground is rejected.

Burden of proof for deduction of commission expenses and deletability of disallowance where books not rejected - Deletion of disallowance of commission payments on assessment that assessee had not substantiated the expense - HELD THAT: - The Assessing Officer made an ad hoc disallowance of commission payments asserting lack of supporting details. On appeal the CIT(A) considered the submissions and noted that the assessee had furnished a detailed breakup of commission expenses and that the Assessing Officer did not point to any defect in the books of account nor reject them. The Tribunal found no reason to interfere with the CIT(A)'s conclusion that the Assessing Officer failed to demonstrate that the commission expenditure was ingenuine or not allowable, and therefore sustained deletion of the disallowance. [Paras 16, 17]

Disallowance of commission payments deleted by the CIT(A) is sustained and the revenue's ground is rejected.

Final Conclusion: The Tribunal dismissed the revenue's appeal for A.Y. 2011-12, upholding the CIT(A)'s deletion of disallowances under section 40(a)(ia) in respect of carriage/channel placement fees, editing expenses and commission payments; the deletions were founded on the application of Explanation III to section 194C as the specific provision for broadcasting/telecasting and on the principle that section 40(a)(ia) is not attracted in cases of short deduction of TDS, and on the absence of any substantiated defect in books regarding commission payments.

Allowability of ESOP discount as business remuneration under section 37(1) - ESOP discount as an ascertained liability during vesting (not a contingent liability) - Quantification of ESOP cost and adjustment on exercise or lapse of options - Interest disallowance under section 36(1)(iii) - nexus between borrowed funds and capital work in progress - Availability of own funds (share capital and reserves) as a defence to interest disallowance

Allowability of ESOP discount as business remuneration under section 37(1) - ESOP discount as an ascertained liability during vesting (not a contingent liability) - Quantification of ESOP cost and adjustment on exercise or lapse of options - Deletion of disallowance of ESOP expenses claimed as deduction under section 37(1) for A.Y. 2008-09 and A.Y. 2009-10 - HELD THAT: - The Tribunal upheld the view of the Ld. CIT(A) following the Special Bench decision in Biocon Ltd. that the discount under ESOPs constitutes a mode of compensating employees and is part of their remuneration, not a short capital receipt or capital expenditure. The Tribunal accepted that incurrence of liability arises during the vesting period - rendering the liability ascertained (not merely contingent) even though precise quantification may occur on exercise - and hence deductible under section 37(1) subject to spreading the deduction over the vesting period. The Tribunal further endorsed the principle that provisional deductions taken during vesting must be adjusted where options lapse or the actual discount on exercise differs, with reversal where no employee cost ultimately arises. It found no infirmity in the Ld. CIT(A)'s reliance on the Biocon Special Bench and other precedents in deleting the AO's disallowance.

Grounds of the revenue challenging deletion of ESOP expense disallowance are dismissed; disallowance deleted.

Interest disallowance under section 36(1)(iii) - nexus between borrowed funds and capital work in progress - Availability of own funds (share capital and reserves) as a defence to interest disallowance - Deletion of disallowance of interest under section 36(1)(iii) for A.Y. 2010-11 to A.Y. 2013-14 - HELD THAT: - The Tribunal sustained the Ld. CIT(A)'s finding that the Assessing Officer failed to establish a nexus between borrowed funds and capital work in progress. Relying on the coordinate bench's decision in the assessee's own case for A.Y. 2014-15 and on authorities recognising that availability of adequate interest free own funds (share capital and reserves) precludes disallowance, the Tribunal observed that standalone accounts demonstrated that own funds materially exceeded CWIP. In these circumstances, and absent contrary evidence, the AO's addition was held unsustainable and the deletion by the Ld. CIT(A) was upheld.

Revenue's grounds against deletion of interest disallowance are dismissed for A.Y. 2010-11 to A.Y. 2013-14.

Final Conclusion: All appeals filed by the revenue are dismissed: disallowance of ESOP expenses for A.Y. 2008-09 and A.Y. 2009-10 deleted; disallowance of interest under section 36(1)(iii) for A.Y. 2010-11 to A.Y. 2013-14 deleted.

Framing of issues beyond pleadings - benami transaction / Prohibition of Benami Transactions (Prohibition) Act, 1988 - exception for trustee or fiduciary holding - burden of proof on person claiming title - effect of a registered release deed as transfer or gift - estoppel against challenging title - perversity of appellate findings

Framing of issues beyond pleadings - Whether the appellate court was justified in framing an additional issue on benami transactions beyond the pleadings. - HELD THAT: - The High Court observed that the first appellate court framed Issue No.5 on whether the suit was barred by the Benami Transactions (Prohibition) Act, 1988, although that specific plea did not feature in the rival pleadings. The court held that, while the framing of an issue must generally be grounded in pleadings, the appellate court was entitled to examine the legal effect of the release deed placed on record and to test whether the transaction fell within the statutory bar. However, framing an issue which has no basis at all in the pleadings must be approached cautiously; here the appellate court could consider the release deed because its legal effect was central to the parties' competing title contentions and to the reliefs claimed. (See discussion at paras 11-14.) [Paras 11, 12, 13]

The appellate court could examine the release deed's legal effect notwithstanding that the benami plea was not specifically pleaded, but such examination must adhere to pleadings and evidentiary limits.

Benami transaction / Prohibition of Benami Transactions (Prohibition) Act, 1988 - exception for trustee or fiduciary holding - Whether the suit was barred by the Benami Transactions Act or whether the property was held by Mayarani Majumder in a fiduciary/trustee capacity thereby attracting the statutory exception. - HELD THAT: - The court analysed Section 4 of the Benami Transactions Act (pre-amendment) and held that the record showed the property was held by Mayarani Majumder as trustee for Hrisikesh Majumder. Applying the statutory exception for a person holding property in a fiduciary capacity for the benefit of another, the court concluded that the prohibition in Section 4 did not bar the plaintiffs' suit. The High Court therefore found that the transaction fell within the trustee/fiduciary exception and was not a benami holding attracting the bar on suits or defences. (See paras 12-15.) [Paras 12, 15]

The Benami Transactions Act did not bar the plaintiffs' claim because the property was held by Mayarani Majumder in a trustee/fiduciary capacity for Hrisikesh Majumder.

Effect of a registered release deed as transfer or gift - burden of proof on person claiming title - Whether the registered release deed executed by the legal heirs operated as a valid transfer (or gift) of title to Hrisikesh Majumder and whether the plaintiffs discharged the burden of proof. - HELD THAT: - Relying on the principle in Kuppuswami Chettiar that a registered instrument styled as a release may operate as a conveyance or gift if it clearly discloses an intention to transfer, the High Court examined the recital of the release deed. The deed expressly stated that Mayarani Majumder had no ownership and that her legal heirs had no claim, and contained an unambiguous intention that the named person was the owner and was to be mutated. The court found no challenge to the deed's execution or admission, and that the defendant had admitted the predecessor's ownership and entered into an agreement of sale with the vendor's heirs. Given these facts and the lack of evidence discharging the onus required by the Evidence Act, the High Court held that the release deed operated as a deed of transfer (or, in absence of consideration, as an effective transfer/gift) and that the plaintiffs had established title. (See paras 14-17.) [Paras 14, 15, 16, 17]

The registered release deed was proved to be a valid deed of transfer (or effective gift) disclosing an intention to transfer, and the plaintiffs discharged the burden to establish title.

Estoppel against challenging title - perversity of appellate findings - Whether the first appellate court's findings on the additional issues were perverse and whether the defendant was estopped from contesting the plaintiffs' title and possession. - HELD THAT: - The High Court held that the first appellate court's conclusion that the release deed did not effectuate transfer and its criticism regarding non-examination of attesting witnesses were unsupported and perverse. The High Court found that the deed's admission was unchallenged, the defendant had admitted the predecessor's ownership and had entered into an agreement of sale with the vendor's heirs, and no evidence was led to discharge the onus under Section 103 of the Evidence Act. Consequently, the defendant was estopped from questioning the valid transfer and the appellate court's contrary findings were set aside. (See paras 15-17.) [Paras 15, 17]

The appellate court's adverse findings were perverse; the defendant was estopped from disputing the proved transfer and title.

Declaration of title, possession and consequential injunction - Whether the plaintiffs were entitled to a declaration of right, title and possession and a decree for perpetual injunction. - HELD THAT: - Having held that the release deed operated as a valid transfer and that the defendant was estopped from disputing title, the High Court concluded that the plaintiffs' title and possession were established. The court restored the trial court's decree which had declared title and possession in favour of the plaintiffs and granted perpetual injunction to protect their peaceful possession. The impugned appellate judgments and decrees were set aside and the trial court's decree restored. (See paras 17-18.) [Paras 17, 18]

Plaintiffs entitled to declaration of right, title and possession and to a decree of perpetual injunction; impugned appellate judgments set aside and trial court decree restored.

Final Conclusion: The appeals are allowed. The High Court held that the first appellate court erred and its findings on the additional benami issue were perverse; the registered release deed was proved to effectuate transfer (or gift) and the Benami Transactions Act did not bar the suit because the property was held in a fiduciary/trustee capacity; the plaintiffs' title and possession are declared and their decree of perpetual injunction is restored.

Writ of certiorari - writ petition withdrawal - preservation of statutory remedies - mandatory pre-deposit under Section 129E of the Customs Act, 1962 - rejection of appeal for non-production of pre-deposit

Writ petition withdrawal - preservation of statutory remedies - Dismissal of the writ petition as withdrawn while preserving the petitioner's statutory remedies against Ext.P2 order. - HELD THAT: - Learned counsel for the petitioner sought permission to withdraw the writ petition without prejudice to the petitioner's right to invoke statutory remedies against the impugned Ext.P2 order. The Court accepted that request and declined to adjudicate the merits of Ext.P2. No substantive determination was made on the correctness of Ext.P2 or on the pre-deposit contentions recorded in the respondents' statement. The order of dismissal is therefore procedural: the petition stands dismissed as withdrawn, and the petitioner is left free to pursue any remedy available under law to challenge Ext.P2.

Writ petition dismissed as withdrawn, without prejudice to the petitioner's statutory remedy to challenge Ext.P2.

Final Conclusion: The writ petition is dismissed as withdrawn on the petitioner's application; the dismissal is without prejudice to any statutory remedy available to challenge the impugned Ext.P2 order.

Deactivation and reactivation of Director Identification Number (DIN) - Deactivation of DIN not warranted solely by temporary disqualification under Section 164(2) - Rule based grounds for cancellation or deactivation of DIN - Registrar of Companies' duty to permit filing of statutory documents for restoration - Tribunal's power to enforce its orders under Section 424(3) as a decree

Deactivation of DIN not warranted solely by temporary disqualification under Section 164(2) - Rule based grounds for cancellation or deactivation of DIN - Whether the DIN of directors may be cancelled or deactivated merely because they are temporarily disqualified under Section 164(2) of the Companies Act, 2013 - HELD THAT: - The Tribunal examined the statutory scheme and the Rules governing cancellation or deactivation of DIN and noted that the Rules prescribe specific grounds (such as duplication, wrongful or fraudulent obtainment, death, unsoundness of mind, insolvency, or failure to file DIR 3 KYC) for cancellation/deactivation. The Tribunal found that neither the Act nor the Rules authorise cancellation or deactivation of a DIN solely on the basis of the temporary disqualification envisaged by Section 164(2). The Tribunal relied on the reasoning in Mukut Pathak & Ors Vs Union of India & Anr. which held that Section 164(2) provides temporary disqualification for appointment/re appointment and does not mandate deactivation of an existing DIN; enforcement of Section 167(1) does not license deactivation outside the rule specified grounds. Accordingly, deactivation on the ground of disqualification under Section 164(2) is not supported by the statutory framework or the Rules. [Paras 6, 9]

The Tribunal held that disqualification under Section 164(2) alone does not warrant cancellation or deactivation of a DIN and such deactivation cannot be effected except on grounds specified in the Rules.

Deactivation and reactivation of Director Identification Number (DIN) - Registrar of Companies' duty to permit filing of statutory documents for restoration - Tribunal's power to enforce its orders under Section 424(3) as a decree - Whether the Registrar of Companies should be directed to reactivate the DINs to enable filing of defaulted annual returns and financial statements for restoration of the company - HELD THAT: - The Tribunal observed that the Registrar of Companies did not respond to the notice and that the applicant had complied with the Tribunal's earlier directions (filing declaration regarding demonetisation period deposits and payment of costs). Having found the legal position that DINs are not to be deactivated solely for disqualification under Section 164(2), and relying on the authority referred to, the Tribunal considered it just and proper to direct reactivation. The Tribunal invoked its enforcement jurisdiction under Section 424(3) to make a consequential direction to the RoC to reactivate the specified DINs so that the company may file the outstanding statutory documents; the RoC was authorised to collect any applicable fine/penalty and to update records thereafter. The order was confined to enabling compliance for restoration and preserved the RoC's right to take other lawful action for separate violations. [Paras 8, 10]

The Tribunal directed the Registrar of Companies to reactivate the DINs of the named directors to enable filing of defaulted statutory documents, subject to collection of applicable fees/fine and updating of records, and limited the order to violations leading to the DIN deactivation.

Final Conclusion: MA/158/KOB/2020 disposed of: the Tribunal held that temporary disqualification under Section 164(2) does not justify DIN deactivation under the Rules and directed the Registrar of Companies to reactivate the specified DINs to enable filing of statutory documents, while preserving the ROC's power to take other lawful action.

Scheme of Amalgamation - sanction under Sections 230 and 232 of the Companies Act, 2013 - dispensing with meetings - procedural compliance and notice to statutory authorities - vesting of assets, rights and liabilities - transfer of employees on existing terms - compliance with applicable accounting standards - no bar to tax, stamp duty or other statutory liabilities - filing of Form CAA-7 and certified copy with Registrar

Procedural compliance and notice to statutory authorities - dispensing with meetings - compliance with applicable accounting standards - Whether the petition complied with statutory procedural requirements, responses to the Regional Director's observations and requirements of notice/publication so as to permit the Tribunal to proceed with sanction. - HELD THAT: - The Tribunal recorded that the joint petition was maintainable and that directions issued at the first motion stage (including dispensing with certain class meetings and holding the meeting of secured creditors of the Transferee Company) were complied with: the secured creditors' meeting was held and voted unanimously in favour and the chairperson's and scrutinizer's reports were filed. The Petitioner Companies filed affidavits of service, newspaper publications and proofs of service on statutory authorities. The Regional Director's observations were noted and met by the petitioners by undertaking compliance with Section 232(3)(i), furnishing explanations and documentary evidence concerning payment of employee bonus and filing of CHG-4; the RoC/Official Liquidator reported no complaint. In fulfilment of the proviso to sub section (7) of Section 230, the petitioners placed on record a chartered accountant's certificate confirming accounting treatment in accordance with applicable accounting standards and provisional financial statements. The Income Tax Department raised no objection at hearing though the tax position was reserved to law. On the stated compliance and absence of objections, the Tribunal found no procedural impediment to sanctioning the Scheme. [Paras 7, 8, 9, 10, 12]

Procedural requirements, responses to the Regional Director and statutory notices were found to be satisfactorily complied with and did not preclude sanction of the Scheme.

Sanction under Sections 230 and 232 of the Companies Act, 2013 - vesting of assets, rights and liabilities - transfer of employees on existing terms - filing of Form CAA-7 and certified copy with Registrar - Whether the Scheme of Amalgamation should be sanctioned and, if so, the legal consequences upon effectiveness of the Scheme. - HELD THAT: - Having considered the materials and approvals recorded, the Tribunal sanctioned the Scheme under Sections 230-232. The order gives effect, from the appointed date, to transfer and vesting without further act or deed of the undertakings, property, rights, powers, contracts and proceedings of the Transferor Companies in the Transferee Company; records that liabilities and duties shall stand transferred to the Transferee Company; and directs that all subsisting contracts and instruments shall be enforceable by or against the Transferee Company. Employees of the Transferor Companies are to be deemed employees of the Transferee Company on terms no less favourable than before. The Transferor Companies are to be dissolved without winding up upon filing of the certified copy. The Tribunal further directed compliance steps including deposits and filing (Form CAA 7 and affidavits of schedule of property) and ordered communication of the certified copy to the Registrar for registration and consolidation of files. [Paras 11, 13, 16, 17]

The Scheme is sanctioned; on the appointed date assets, rights, liabilities and employees stand transferred to and vested in the Transferee Company and the Transferor Companies shall be dissolved on compliance with filing requirements.

No bar to tax, stamp duty or other statutory liabilities - remedial action for statutory violations - Whether the Tribunal's sanction exempts the parties from payment of taxes, duties or from action under other statutes, and whether the sanction bars subsequent regulatory or legal proceedings. - HELD THAT: - The Tribunal expressly clarified that the sanction does not operate as an exemption from payment of stamp duty, taxes including income tax, GST or other charges and that payment in accordance with law and compliance with permissions required under any law remain the responsibility of the parties. It further reserved the right to action: if any deficiency or violation of any enactment, rule or regulation is found, the sanction will not preclude action in accordance with law against concerned persons, directors or officials. [Paras 13, 14, 15]

Sanction does not absolve the companies or persons from tax, stamp duty or other statutory liabilities nor bar appropriate legal or regulatory action for any violations.

Final Conclusion: The Tribunal found procedural compliance and no impediment to sanctioning the joint Scheme of Amalgamation, granted sanction under Sections 230-232 with directions as to vesting, employee transfer, dissolution and filings, required certain deposits and filings, and clarified that the sanction does not relieve the parties from tax, duty or other statutory liabilities nor inhibit lawful action for any violations.

Stay of meetings - abeyance of resolutions - fraudulent management - maintainability of company petition - notice of AGM and annexures - Companies Fresh Start Scheme 2020

Stay of meetings - abeyance of resolutions - fraudulent management - notice of AGM and annexures - maintainability of company petition - Companies Fresh Start Scheme 2020 - Application for interim stay of the Annual General Meetings of the company scheduled on 11.12.2020 - HELD THAT: - The Tribunal considered the petitioner's allegations of forged resignation, infusion of directors without election, and overall fraudulent management, and noted the Registrar of Companies' report referring to alleged illegalities. The petitioner sought an interim administrator and a stay on the AGMs, pressing prejudice if sham meetings proceeded. Respondents contended the company petition's maintainability was doubtful, disputed the necessity to annex documents to AGM notices, and emphasised the need to hold the AGMs to avail the Companies Fresh Start Scheme 2020 before its deadline. Balancing these contentions, the Tribunal declined to grant a stay of the AGMs but directed that any decisions, resolutions or business transacted at the AGMs be kept in abeyance until further orders, while expressly permitting the respondents to take steps necessary to avail the benefit of the Companies Fresh Start Scheme 2020. [Paras 12]

Prayer for interim stay of the AGMs rejected; however, resolutions/business transacted at the AGMs are to be kept in abeyance until further orders, and respondents may avail the Companies Fresh Start Scheme 2020.

Final Conclusion: Application for stay of the AGMs dismissed; the Tribunal directed that any decisions/resolutions passed at the AGMs remain in abeyance pending further orders, while allowing respondents liberty to pursue relief under the Companies Fresh Start Scheme 2020.

Power to suo motu restore a company petition - principles governing initiation of inquiry under Section 340 Cr.P.C. - operation of Section 195 and Section 340 Cr.P.C. in relation to tribunals under amended Section 424 Companies Act - requirement of being 'expedient in the interest of justice' and prima facie deliberate falsehood before ordering prosecution for perjury/forgery - inherent and procedural powers of the Adjudicating Authority (including Rule 11 NCLT Rules) to prevent abuse and regulate procedure

Power to suo motu restore a company petition - inherent and procedural powers of the Adjudicating Authority (including Rule 11 NCLT Rules) to prevent abuse and regulate procedure - Validity of the Adjudicating Authority's suo motu restoration of CP/204/2019 - HELD THAT: - The Tribunal upheld the Adjudicating Authority's decision to restore CP/204/2019 suo motu. Having regard to the factual sequence-disposal of the petition due to admission of a different petition which was later withdrawn-and the multiplicity of interlocutory applications causing delay and perceived abuse of process, the Adjudicating Authority acted within its powers. The Tribunal noted that Section 424 (as amended) and Rule 11 of the NCLT Rules furnish the Adjudicating Authority with ample power to regulate procedure and to pass orders necessary to meet the ends of justice. In the circumstances, restoration to enable determination of the Financial Creditor's claim on merits and to cut short procedural delays was not erroneous. [Paras 12, 13, 26, 29]

Suo motu restoration of CP/204/2019 is maintained.

Operation of Section 195 and Section 340 Cr.P.C. in relation to tribunals under amended Section 424 Companies Act - principles governing initiation of inquiry under Section 340 Cr.P.C. - requirement of being 'expedient in the interest of justice' and prima facie deliberate falsehood before ordering prosecution for perjury/forgery - Whether the Adjudicating Authority could order a preliminary inquiry and initiate prosecution under Section 340 Cr.P.C. in respect of alleged forged signatures and perjury - HELD THAT: - The Tribunal clarified that Adjudicating Authority is not devoid of jurisdiction to act under Section 340 Cr.P.C. read with Section 195 Cr.P.C.; the amended Section 424 of the Companies Act renders proceedings before NCLT/NCLAT judicial proceedings for purposes of Sections 193 and 195 IPC and Chapter XXVI Cr.P.C. Thus, in an appropriate case the Adjudicating Authority may hold a preliminary inquiry under Section 340 Cr.P.C. However, the statutory threshold requires the court to be "of opinion that it is expedient in the interest of justice" to conduct such inquiry, and prosecution should be ordered only where there is prima facie deliberate falsehood on a matter of substance and a reasonable foundation for the charge. Applying that test, the Tribunal found that the Appellant had not shown mens rea, any tangible benefit or advantage to the Financial Creditor from the alleged non-signature, nor material demonstrating that the alleged forgery would have caused an erroneous opinion on any point material to the proceeding. Reliance was placed on the settled law that courts must exercise caution before directing prosecution for perjury/forgery. [Paras 17, 18, 26, 28]

While the Adjudicating Authority has jurisdiction to order a preliminary inquiry under Section 340 Cr.P.C., in the present case it was not expedient in the interest of justice to hold such an inquiry; no order for prosecution was warranted.

Disposition of interlocutory applications withdrawn as not pressed - requirement of 'expedient in the interest of justice' before preliminary inquiry - Fate of interlocutory applications I.A. Nos. 41 and 42 (applications for restoration) and I.A. Nos. 51 and 52 (applications alleging forgery/perjury) - HELD THAT: - The Tribunal upheld the Adjudicating Authority's dismissal of I.A. Nos. 41 and 42 as 'not pressed' and maintained that withdrawal simpliciter was permissible. As to I.A. Nos. 51 and 52, which sought initiation of criminal proceedings and cross-examination on alleged forged signatures, the Tribunal held that the Adjudicating Authority's earlier direction that the Corporate Debtor approach an appropriate forum was to be set aside. Applying the legal threshold for Section 340 Cr.P.C., the Tribunal concluded that it was not expedient in the interest of justice to conduct a preliminary inquiry in this case and therefore I.A. Nos. 51 and 52 stand disposed on that basis. The Tribunal also noted that the Corporate Debtor had itself procured and filed a private forensic report, diminishing the weight of prima facie material warranting a court-initiated inquiry. [Paras 6, 11, 26, 29]

I.A. Nos. 41 and 42 remain dismissed as not pressed; I.A. Nos. 51 and 52 are disposed as it is not expedient in the interest of justice to hold a preliminary inquiry under Section 340 Cr.P.C.

Admissibility and weight of private forensic handwriting reports - limits on initiating criminal proceedings by tribunals - Disposition of I.A. No. 62 (forensic report filed by Corporate Debtor) and its consequential effect - HELD THAT: - The Tribunal maintained the Adjudicating Authority's dismissal of I.A. No. 62 as infructuous. It observed that the Corporate Debtor's unilateral procurement and filing of a private forensic report, without directing comparative material to be sent through the Court, undermined the establishment of a proper prima facie case that would justify a court-initiated inquiry. The Tribunal therefore saw no basis to disturb the Adjudicating Authority's order disposing of that application. [Paras 6, 25, 29]

Disposal of I.A. No. 62 as directed by the Adjudicating Authority is maintained.

Final Conclusion: The appeal is disposed: the Adjudicating Authority's sua motu restoration of CP/204/2019 is maintained; I.A. Nos. 41 and 42 remain dismissed as not pressed; the observations directing the Corporate Debtor to pursue other fora are set aside and, on merits, I.A. Nos. 51 and 52 are disposed as it is not expedient in the interest of justice to hold a preliminary inquiry under Section 340 Cr.P.C.; I.A. No. 62 dismissal is maintained. No costs.

Financial Creditor - Operational Creditor - Financial Debt - Time value of money - Duties of Interim Resolution Professional / Resolution Professional to collate and verify claims - Committee of Creditors' commercial wisdom - Limits of Committee of Creditors' powers - Reclassification of creditor status - Validity of resolutions passed by Committee of Creditors

Limits of Committee of Creditors' powers - Financial Creditor - Operational Creditor - Committee of Creditors cannot adjudicate or determine whether a claimant is a Financial Creditor or an Operational Creditor; that is not an exercise of its commercial wisdom. - HELD THAT: - The Tribunal held that the status of a claimant as a Financial Creditor or Operational Creditor requires an application of law to facts and is not amenable to determination by voting of the Committee of Creditors. The Code assigns to the IRP/RP the task of receiving, collating and verifying claims and constituting the CoC; adjudicatory challenges to categorisation lie before the Adjudicating Authority. Allowing the CoC to decide creditor status would create conflict of interest and fall outside the matters entrusted to the CoC under Sections 21, 24 and 28. Consequently, the CoC's resolutions purporting to reclassify or eliminate a creditor on that ground are beyond its jurisdiction and not an exercise of commercial wisdom. [Paras 26, 27, 35, 42, 55]

The determination of whether a claimant is a Financial or Operational Creditor is not within the jurisdiction of the Committee of Creditors and such determination cannot be made by CoC voting.

Duties of Interim Resolution Professional / Resolution Professional to collate and verify claims - Reclassification of creditor status - A Resolution Professional/Interim Resolution Professional, having collated and admitted a claim as a Financial Creditor, cannot suo motu reclassify that creditor as an Operational Creditor in the name of 'updating the list of claims'. - HELD THAT: - The Tribunal analysed the statutory scheme under Sections 18 and 25 and related regulations and concluded that while the IRP/RP has the duty to collate, verify and maintain an updated list of claims, that duty does not empower the IRP/RP to unilaterally review and change the status of an already admitted creditor. Updating the list permits admission or rejection of further claims and addition to the list, but not retrospective reclassification of an admitted creditor without approaching the Adjudicating Authority. The Tribunal relied on precedent and statutory duties to observe that the RP has no adjudicatory power to decide creditor classification and that grievances regarding categorisation must be agitated before the Adjudicating Authority. [Paras 27, 28, 29, 42, 59]

The RP/IRP may update the list of claims by admitting or rejecting further claims, but cannot change the status of a creditor already categorised as Financial Creditor to Operational Creditor on his own motion.

Validity of resolutions passed by Committee of Creditors - Committee of Creditors' commercial wisdom - Resolutions of the Committee of Creditors that purported to reconstitute the CoC by eliminating BVN Traders or to approve withdrawal of CIRP after such reconstitution are beyond the CoC's power and must be ignored. - HELD THAT: - The Tribunal found that the 7th and 8th CoC meetings, which sought to reclassify BVN Traders and eliminate its name from the CoC and thereafter approve withdrawal under Section 12A, were made in contravention of the Adjudicating Authority's earlier declaration and were based on steps that the CoC was not empowered to take. Because the CoC cannot adjudicate creditor status, the resolutions taken to eliminate BVN Traders from the CoC and the subsequent resolution to move for withdrawal of CIRP (which depended on the altered composition) are illegal and to be ignored. The Tribunal directed that such CoC decisions are beyond jurisdiction and cannot be treated as valid exercises of commercial wisdom. [Paras 30, 31, 32, 55, 56]

The CoC resolutions to eliminate BVN Traders from the Committee and the consequent approval for withdrawal of CIRP (dependent on that reconstitution) are beyond CoC's jurisdiction and are to be ignored.

Financial Debt - Time value of money - Financial Creditor - On the facts before the Tribunal, BVN Traders is a Financial Creditor and the loan advanced to the corporate debtor is a Financial Debt within the meaning of the Code. - HELD THAT: - Applying the definition of Financial Debt and the requirement of disbursal against consideration for the time value of money, the Tribunal found that the respondent advanced funds directly to the corporate debtor for working capital, took possession of title deeds as security, and charged interest - facts that satisfy the essential elements of a financial debt. The Tribunal relied on precedent explaining that disbursal against consideration for time value of money is the core element of financial debt and concluded that, on the material before it (including ledger, bank statements, communications and the admitted deposit of title deeds), BVN Traders qualifies as a Financial Creditor under Section 5(7) and the debt as Financial Debt under Section 5(8). [Paras 51, 52, 53, 54, 57]

BVN Traders is a Financial Creditor and the loan in question is a Financial Debt under the Code.

Adjudicating Authority's order - Committee of Creditors' commercial wisdom - The Adjudicating Authority's order rejecting CA No.142/2019 and declaring BVN Traders a Financial Creditor is sustained, but the Tribunal set aside the Adjudicating Authority's reliance on the CoC resolution as the basis for that declaration. - HELD THAT: - While upholding the ultimate declaration that BVN Traders is a Financial Creditor, the Tribunal observed that the Adjudicating Authority should not have relied principally on the CoC's majority vote as an exercise of commercial wisdom to determine creditor status. The Tribunal therefore accepted the Adjudicating Authority's outcome based on the provisions and factual matrix but set aside the reasoning to the extent it treated the CoC decision as determinative. The Tribunal affirmed the AA's order on merits and issued directions clarifying the respective roles of IRP/RP, CoC and the Adjudicating Authority. [Paras 34, 36, 57, 58, 60]

The Adjudicating Authority's declaration that BVN Traders is a Financial Creditor is upheld, but its reliance on the CoC resolution as the rationale is set aside; the CoC has no adjudicatory power to determine creditor status.

Final Conclusion: The appeal is dismissed. BVN Traders is held to be a Financial Creditor and the loan a Financial Debt; however, the Tribunal clarifies that the Committee of Creditors has no power to adjudicate creditor classification and that the Resolution Professional cannot unilaterally reclassify an admitted creditor. CoC resolutions taken to remove BVN Traders and consequential withdrawal steps are beyond CoC's jurisdiction and are to be ignored; the Adjudicating Authority's order is upheld on merits though its reliance on the CoC resolution as reasoning is set aside.

Exclusion of time in reckoning Corporate Insolvency Resolution Process period - non-speaking order - extension of limitation by suo moto proceedings of the Hon'ble Supreme Court due to COVID-19 lockdown - judicial notice of hardships caused by lockdown restrictions on carrying out CIRP functions

Exclusion of time in reckoning Corporate Insolvency Resolution Process period - extension of limitation by suo moto proceedings of the Hon'ble Supreme Court due to COVID-19 lockdown - judicial notice of hardships caused by lockdown restrictions on carrying out CIRP functions - Prayer for exclusion of time from 20th March, 2020 to 2nd September, 2020 in reckoning the 180-day Corporate Insolvency Resolution Process period was allowable and should be excluded. - HELD THAT: - The Tribunal held that the Apex Court's suo moto order of 23rd March, 2020 extending limitation for filings in view of COVID-19, while formally directed to filings, reflects a broader protective purpose addressing hardships caused by the lockdown and justifies analogous relief in other proceedings. The Adjudicating Authority had declined the requested exclusion of 167 days without addressing the reasons advanced by the Interim Resolution Professional and labelled those reasons implausible; that approach rendered the impugned order non-speaking as to the factual and legal basis for rejection. Taking judicial notice of lockdown-related curbs on movement and business activity, and having regard to the specific contention that restrictions in the NCR impaired the IRP and his team's ability to carry out CIRP functions, the Tribunal found the recommendation of the Committee of Creditors dated 9th September, 2020 to exclude the said period to be warranted and directed exclusion of time from 20th March, 2020 to 2nd September, 2020 in computing the ordinary 180-day CIRP period. The Tribunal left open the possibility of seeking further extension from the Adjudicating Authority on cogent grounds if required.

Exclusion of time from 20th March, 2020 to 2nd September, 2020 directed; IRP permitted to proceed with CIRP and may seek further extension from the Adjudicating Authority if necessary.

Non-speaking order - Validity of the Adjudicating Authority's order declining exclusion to the extent of 167 days. - HELD THAT: - The Tribunal found that the Adjudicating Authority had not addressed the reasons submitted for exclusion and had merely observed that the reasons were not plausible without explaining why; such omission rendered the order non-speaking to that extent and therefore unsustainable. For that reason the impugned order was set aside insofar as it refused the requested exclusion and substituted the Tribunal's direction permitting exclusion for the period found appropriate.

Impugned order set aside to the extent it declined the exclusion; direction issued to allow the exclusion sought for the specified period.

Final Conclusion: The appeal is allowed; the impugned order is set aside insofar as it refused exclusion of time and the period from 20th March, 2020 to 2nd September, 2020 is excluded in reckoning the 180-day CIRP period; the Interim Resolution Professional is directed to proceed expeditiously and may apply to the Adjudicating Authority for any further extension on cogent grounds.

Intervention/impleadment as necessary party affecting creditor's rights - maintainability of impleadment applications - collusion between liquidator and creditor - priority of workmen's dues under the liquidation waterfall

Intervention/impleadment as necessary party affecting creditor's rights - maintainability of impleadment applications - collusion between liquidator and creditor - MA/148/KOB/2020 (intervention/impleadment application by Kopran Limited) is not maintainable and is dismissed. - HELD THAT: - The Tribunal examined whether the applicant could be impleaded in the list of applications filed by ex workmen. It found that the principal target application (IBA/258/Chennai Bench) in which impleadment was sought had already been disposed of, and therefore a prayer to be impleaded in a non live proceeding could not be entertained. The Tribunal further held that, to implead itself in multiple pending applications the applicant should have filed separate impleading applications in those M.As and served the ex workmen so they could respond; filing a single M.A behind the ex workmen's backs for convenience and to avoid filing numerous interventions was impermissible. The Tribunal also recorded that the Liquidator's counter disclosed collusion with the applicant aimed at defeating the legitimate claims of the ex workers; while the Liquidator may protect the admitted claim of the creditor, that cannot be at the cost of workmen's rights. In view of these findings the M.A was dismissed as not maintainable, subject to the applicant's liberty to file applications in accordance with law and procedure. [Paras 22, 23, 24, 25]

MA/148/KOB/2020 is dismissed as not maintainable; applicant may file fresh applications in accordance with law.

Maintainability of impleadment applications - priority of workmen's dues under the liquidation waterfall - IA/189/KOB/2020 (application by Ex Excel Glasses Employees' Federation to dismiss the intervention) stands disposed as moot. - HELD THAT: - IA/189 sought dismissal of the intervention application (MA/148). Since MA/148 has been dismissed as not maintainable, there is no live relief remaining in IA/189 for adjudication. The Tribunal therefore disposed IA/189 accordingly. [Paras 26]

IA/189/KOB/2020 is disposed of as there is nothing further to decide.

Final Conclusion: The intervention application filed by Kopran Limited (MA/148/KOB/2020) is dismissed as not maintainable for seeking impleadment in proceedings that are not properly before the Tribunal and for being filed without making ex workmen parties; the related application by the workmen (IA/189/KOB/2020) is disposed of as moot.

Licence fee as CIRP cost - restriction to Income Tax returns filed - going concern requirement for entitlement to licence fee - adjustment of security deposit against payment with interest - implementation of appellate direction

Licence fee as CIRP cost - restriction to Income Tax returns filed - implementation of appellate direction - Entitlement and quantum of licence fee for the CIRP period and the basis for quantification - HELD THAT: - The Tribunal found that the Hon'ble NCLAT's order dated 29.07.2020 directed payment of licence fee as part of CIRP costs subject to a condition that the amount be restricted to the Income Tax returns "so far filed". The Tribunal accepted that the NCLAT direction must be implemented and that the applicants' entitlement, if any, during the CIRP period (15.01.2018 to 23.01.2019) is limited to amounts supported by IT returns filed within the timelines applicable. The Tribunal considered the applicants' explanation regarding COVID-19 extensions and found that the IT returns were filed thereafter; nevertheless the NCLAT-imposed limitation governs quantification. On that basis the Tribunal concluded that only the claim of M/s Grove Limited (Applicant No.2) qualifies for payment as CIRP cost and directed the Resolution Applicant to pay the licence fee and GST to Applicant No.2, in accordance with the quantification based on the IT returns as constrained by the NCLAT order. [Paras 8, 13, 15, 17]

Respondent No.3 to pay the licence fee and GST to Applicant No.2 for the CIRP period, quantified in accordance with the NCLAT direction limiting recovery to amounts supported by Income Tax returns.

Going concern requirement for entitlement to licence fee - Whether Applicant No.1 (factory premises) is entitled to licence fee for the CIRP period - HELD THAT: - On the material before it and the chart filed by the Resolution Professional, the Tribunal found that the factory premises of Applicant No.1 (MIPL) were not used for running the Corporate Debtor's business as a "going concern" during the CIRP and had not been used for that purpose for several years prior to the insolvency commencement date. That factual finding, not rebutted by the applicants, led the Tribunal to conclude that no licence fee is payable to Applicant No.1 for the CIRP period under the NCLAT's test requiring use as a going concern. [Paras 16]

No licence fee payable to Applicant No.1 in respect of the factory premises for the CIRP period.

Adjustment of security deposit against payment with interest - Treatment of security deposit held by Applicant No.2 in relation to payment of licence fee - HELD THAT: - The Tribunal found that Applicant No.2 had a security deposit that had not been refunded to the Corporate Debtor. While directing payment of licence fee and GST to Applicant No.2, the Tribunal expressly permitted the Resolution Applicant (Respondent No.3) to adjust the outstanding security deposit (with interest, if any) against the amount payable. This preserves the right to set-off the security deposit while enforcing the NCLAT-directed payment. [Paras 16, 17]

Respondent No.3 may adjust the security deposit (with interest, if any) while making payment of the licence fee and GST to Applicant No.2.

Final Conclusion: The application is allowed partly: the Resolution Applicant is directed to pay the licence fee and GST for the CIRP period to M/s Grove Limited (Applicant No.2), subject to the NCLAT-imposed limitation to amounts supported by Income Tax returns, and the Resolution Applicant may adjust the outstanding security deposit (with interest, if any) against such payment; no licence fee is payable to M/s Merchem (Applicant No.1) for the factory premises. Payment to be effected within four weeks of receipt of the order.

Export of services - Business Auxiliary Services - used outside India - convertible foreign exchange - Export of Services Rules, 2005 - interpretation of 'used outside India' - evidentiary sufficiency of debit notes and Foreign Inward Remittance Certificates

Export of services - Business Auxiliary Services - used outside India - convertible foreign exchange - evidentiary sufficiency of debit notes and Foreign Inward Remittance Certificates - Whether the commission received by the appellant for services rendered to foreign principals qualifies as export of service and is therefore not liable to service tax for the period 2007-08 to 2010-11. - HELD THAT: - The Tribunal found as a fact that the appellant provided services classifiable as Business Auxiliary Services by procuring orders and promoting the business of foreign principals from India and received commission in convertible foreign exchange evidenced by debit notes and corresponding Foreign Inward Remittance Certificates. Applying Rule 3(2) of the Export of Services Rules, 2005 as it stood prior to amendment, the Tribunal held that the twin conditions for export - that the service is provided from India and used outside India, and that payment is received in convertible foreign exchange - were satisfied. The Tribunal relied on CBEC Circulars which explain that for Category III services (business-related services) the determining factor is the accrual of benefit outside India and that services performed in India may nonetheless be treated as used outside India where the benefit accrues to a recipient abroad. The Tribunal also noted precedent reasoning that services performed in India for the business of a foreign principal who uses and benefits from them abroad constitute export of services. In the circumstances, the adjudicating authorities were in error in discounting FIRCs and debit notes as insufficient; those documents coupled with the nature of the activities showed export, and thus no service tax could be levied. [Paras 19, 20, 21, 22]

The demand of service tax confirmed by the lower authorities is not sustainable; the commission receipts are export of services and not taxable.

Final Conclusion: The order of the Commissioner (Appeals) dated May 5, 2016 is set aside and the appellant's appeal is allowed, the Tribunal holding that the commission receipts for 2007-08 to 2010-11 constitute export of services under the Export of Services Rules, 2005 and are not liable to service tax.

Refund of CENVAT credit on surrender of registration under Rule 5 of Cenvat Credit Rules, 2004 - Entitlement to interest on delayed refund after three months - Applicability of Rule 5 as providing for refund where inputs/input services used in manufacture are not adjustable - Binding effect of jurisdictional High Court decisions on Tribunal

Refund of CENVAT credit on surrender of registration under Rule 5 of Cenvat Credit Rules, 2004 - Applicability of Rule 5 prior to and after 01.04.2012 - Binding effect of jurisdictional High Court decisions on Tribunal - Appellant entitled to refund of unutilized Cenvat credit lying in Cenvat credit account at the time of surrender of Central Excise registration under Rule 5 of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal examined Rule 5 as it stood prior to and after 01.04.2012 and concluded that there is no material change in its scope: the rule contemplates allowance of refund where input or input service credit cannot be adjusted, and the post-2012 text only prescribes a formula for export-related cases. The Regional Bench of the Tribunal is bound by the Division Bench judgment of the Jurisdictional High Court in Rama Industries Ltd. and by prior Tribunal decisions following that High Court view (e.g., Shree Krishna Paper Mills). Applying that binding precedent, the Tribunal held that the appellant is entitled to refund of the unutilized Cenvat credit on surrender of registration under Rule 5. [Paras 8]

Refund claim of unutilized Cenvat credit at the time of surrender of registration is allowed under Rule 5 of the Cenvat Credit Rules, 2004.

Entitlement to interest on delayed refund after three months - Consequential relief following allowance of refund - Appellant entitled to interest on the sanctioned refund amount from three months after filing of the refund claim until realization. - HELD THAT: - The Tribunal treated the claim for interest as a consequential legal relief arising from the successful refund claim. Although the interest plea was not pressed before the lower authorities, the Tribunal held that the issue is one of law and could be raised at this stage. Relying on the principle in M/s Ranbaxy Laboratories Ltd., the Tribunal directed that the adjudicating authority shall entertain the appellant's claim for interest from three months after the date of filing the refund claim until its payment. [Paras 12]

Appellant entitled to interest on delayed refund from three months after filing the refund claim; adjudicating authority to entertain and compute interest as consequential relief.

Final Conclusion: The appeal is allowed: the refund of unutilized Cenvat credit on surrender of registration is held admissible under Rule 5 of the Cenvat Credit Rules, 2004, and the appellant is entitled to interest on the refund from three months after filing the claim; the adjudicating authority shall give consequential relief accordingly.

Liability of directors for company tax dues - application of Section 44(6) of the MVAT Act to private companies only - primacy of the Companies Act, 2013 where a provision is made "subject to" its provisions - attachment of director's assets in aid of recovery of company dues

Application of Section 44(6) of the MVAT Act to private companies only - liability of directors for company tax dues - attachment of director's assets in aid of recovery of company dues - primacy of the Companies Act, 2013 where a provision is made "subject to" its provisions - Impugned prohibitory order, demand notice and attachment issued against a non-executive director of a public limited company are unsustainable. - HELD THAT: - The Court applied its earlier decision in Shri Girdhari Lal Lath which construed Section 44(6) of the MVAT Act as expressly being "subject to" the Companies Act, 2013. That construction imports the Companies Act definitions and distinctions between private and public companies into Section 44(6). Section 44(6) therefore operates in relation to a "private company" as understood under the Companies Act and cannot be invoked to fasten joint and several liability on directors of a public limited company. In the present case M/s. Twilight Mercantiles Limited is admitted to be a public limited company and the petitioner is a non-executive director. Applying the stated legal principle, the prohibitory order dated 12.02.2018, the demand notice dated 18.12.2018 and the attachment order dated 10.06.2019 could not be sustained against the petitioner; consequently the assets attached (two flats) must be released. [Paras 9, 10]

Impugned prohibitory order, demand notice and attachment set aside qua the petitioner; attached flats to be released forthwith.

Final Conclusion: Writ petition allowed; orders of prohibitory direction, demand and attachment quashed as not sustainable against a non-executive director of a public limited company in light of the Companies Act, 2013; no order as to costs.

Principles of natural justice - non-service of pre-assessment show-cause notice - denial of personal hearing - setting aside assessment and consequential garnishee order - garnishee order under Section 79 of the Telangana State G.S.T. Act, 2017 - remittal for fresh consideration with opportunity to be heard - rule 64 of the Telangana VAT Rules

Principles of natural justice - non-service of pre-assessment show-cause notice - denial of personal hearing - Validity of the Assessment Order No.35396 dated 26.03.2020 in view of non-service of the pre-assessment show-cause notice and absence of personal hearing. - HELD THAT: - The Court found-admittedly and on record-that no pre-assessment show-cause notice was served on the petitioner and no personal hearing was provided, despite the assessment order recording otherwise. This amounted to a clear violation of the principles of natural justice and caused grave prejudice to the petitioner. In these circumstances the impugned assessment order could not stand and had to be set aside. [Paras 6, 7]

Impugned assessment order set aside on grounds of breach of natural justice.

Setting aside assessment and consequential garnishee order - garnishee order under Section 79 of the Telangana State G.S.T. Act, 2017 - remittal for fresh consideration with opportunity to be heard - rule 64 of the Telangana VAT Rules - Validity of the consequential garnishee order dated 09.11.2020 and procedure to be followed on remand. - HELD THAT: - The consequential garnishee order issued to the bank under Section 79 of the Telangana State G.S.T. Act, 2017 was set aside as it flowed from the vitiated assessment. The matter is remitted to the assessing authority for fresh consideration. The authority is directed to serve a show-cause notice in accordance with rule 64 of the Telangana VAT Rules specifying the proposed tax and turnover, grant the petitioner six weeks from receipt to file objections with supporting material, afford a personal hearing, and thereafter pass a reasoned order communicated to the petitioner. The remand is for fresh adjudication in accordance with these directions. [Paras 8]

Consequential garnishee order set aside; matter remitted for fresh consideration with specified procedural directions.

Final Conclusion: Writ petition allowed; assessment order dated 26.03.2020 and the consequential garnishee order dated 09.11.2020 are set aside and the matter is remitted to the assessing authority to proceed afresh after serving a show-cause notice under rule 64, affording six weeks for objections, a personal hearing and thereafter passing a reasoned order.

Adjustment of tax deducted at source against tax liability under a successor tax statute - refund of tax deducted at source - restoration of registration cancelled for failure to pay tax - administrative verification and direction by executive authority - disbursement of refund after adjustment - waiver of interest on refund subject to timely disbursement

Adjustment of tax deducted at source against tax liability under a successor tax statute - refund of tax deducted at source - administrative verification and direction by executive authority - disbursement of refund after adjustment - Petitioner's claim for adjustment or refund of tax deducted at source after the coming into force of the Bihar Goods and Service Tax Act was directed to be considered and decided by the administrative authority after factual verification. - HELD THAT: - The Court did not adjudicate the merits of entitlement to adjustment or refund but directed the petitioner to appear before respondent no.2 so that the respondent, after ascertaining information from all departments/sources, may pass appropriate directions for adjustment of tax deducted under various statutes and refund of amounts found due in accordance with the Bihar Value Added Tax Act and the Bihar Goods and Service Tax Act. The Court imposed a timeline for administrative action: the authority shall pass the necessary order on or before 31st March, 2021 and, after making any necessary adjustment, disburse the refund found due and admissible on or before 30th April, 2021. The direction is motivated by the fact the matter relates to the 2017-18 period and requires early disposal. The petitioner agreed to forgo a claim for interest if the refund, if found admissible, is disbursed by the stipulated date; the Court recorded and accepted that waiver.

The claim for adjustment or refund was remitted to respondent no.2 for verification and appropriate directions, with specified timelines for order and disbursement and subject to the petitioner's waiver of interest if payment is made by 30 April 2021.

Restoration of registration cancelled for failure to pay tax - administrative verification and direction by executive authority - Petitioner's prayer for restoration of registration cancelled for failure to pay tax for the period 01.07.2017 to 31.03.2018 was directed to the administrative authority for consideration after verification. - HELD THAT: - The Court did not directly restore the registration. Instead, the matter of restoration (sought in relation to the period 01.07.2017 to 31.03.2018) was entrusted to respondent no.2 to examine while ascertaining information from all relevant departments/sources and to pass appropriate directions in accordance with law. This issue was therefore remanded for fresh administrative consideration rather than finally decided on merits by the Court.

Prayer for restoration of registration was remitted to respondent no.2 for verification and appropriate directions in accordance with law.

Final Conclusion: The petition is disposed by remitting the matters of adjustment/refund of tax deducted at source and the restoration of registration to respondent no.2 for factual verification and appropriate directions under the relevant tax statutes; the petitioner was directed to appear before respondent no.2 on 28 December 2020, the authority was directed to pass necessary orders by 31 March 2021 and to disburse any refund found due by 30 April 2021, and the petitioner agreed to relinquish any claim for interest if payment is made by that date.

Definition of "assets" under section 2(ea) of the Wealth Tax Act - exclusion of immovable property used for the assessee's business under section 2(ea)(i)(3) - treatment of property let out as "income from house property" versus "business asset" - consistency of stands in income-tax and wealth-tax proceedings - valuation of immovable property by reference to net maintainable rent and Section 23 of the Income-tax Act - scope of exclusion for commercial/industrial properties in the 1997-1999 amendments

Definition of "assets" under section 2(ea) of the Wealth Tax Act - exclusion of immovable property used for the assessee's business under section 2(ea)(i)(3) - Whether the assessee's industrial land and factory building let out to a third party for manufacture is an "asset" liable to wealth tax for Assessment Year 1997-98 - HELD THAT: - The Tribunal examined the amended definition of "assets" in section 2(ea) as in force for the period 1.4.1997 to 31.3.1999 and the exception in sub-clause (3) which excludes a house occupied for the purposes of any business or profession carried on by the assessee. It held that inclusion of commercial properties in the definition from 1.4.1997 did not render the exceptions otiose and that the exclusion applies only where the assessee himself uses the property for carrying on his business or profession. Mere letting out and assessment of rent as income from house property does not demonstrate that the assessee is carrying on a business of using that property for his own business or profession. On the facts the assessee had not shown that letting out the property was its business; the tenant carried on the manufacturing activity. Consequently the portion occupied by the tenant falls within the definition of "asset" and is taxable under the Wealth Tax Act for the year under consideration. [Paras 16, 18, 20, 21, 24]

The industrial land and factory building let out to Recon Ltd. is an asset liable to wealth tax for Assessment Year 1997-98.

Treatment of property let out as "income from house property" versus "business asset" - consistency of stands in income-tax and wealth-tax proceedings - Whether the assessee can claim exclusion under section 2(ea)(i)(3) by treating the property as a business asset when the same property has been assessed as income from house property - HELD THAT: - The Tribunal reviewed authorities distinguishing business assets from property let out and emphasised that leasing and letting will qualify as a business asset only if the facts demonstrate that leasing is the assessee's business or trading activity. Repeated letting and taxation under the head "house property" and availing of deductions under section 24 do not, by themselves, convert the property into an asset used by the assessee for his own business. The Tribunal also noted the principle that a taxpayer should not adopt inconsistent stands in parallel proceedings; where the income has been taxed as house property, the assessee cannot simultaneously claim the property as a business asset to secure exclusion under section 2(ea)(i)(3). Applying these principles to the facts, the Tribunal found no basis to treat the property as the assessee's business asset. [Paras 21, 22, 23, 24]

The assessee cannot claim exclusion as a business asset where the property is let out and the income is assessed as income from house property; the property remains includible as an asset for wealth-tax purposes.

Valuation of immovable property by reference to net maintainable rent and Section 23 of the Income-tax Act - Whether the Assessing Officer's computation of net maintainable rent (including notional interest) and consequent market value should be sustained or adjusted - HELD THAT: - The Tribunal held that the Assessing Officer must adopt for wealth-tax valuation the same annual value determination as per section 23 of the Income-tax Act used in the income-tax assessment for the same year. The AO had included a notional 15% on certain deposits and other credits while computing gross maintainable rent; the Tribunal directed that the annual value as determined under Section 23 should be adopted for calculating net maintainable rent, allowing corresponding deductions for municipal taxes and gross maintainable rent (G.M.R.) accordingly. This ensures consistency between income-tax and wealth-tax treatment of annual value. [Paras 26]

The Assessing Officer is directed to adopt the same annual value as per Section 23 of the Income-tax Act for determining net maintainable rent and compute valuation and deductions accordingly.

Scope of exclusion for commercial/industrial properties in the 1997-1999 amendments - Whether the market value should be reduced by excluding the value of industrial land separate from the factory building for wealth-tax computation - HELD THAT: - The Tribunal considered the contention that the industrial land element should be deducted from the market value of the factory building. It found that the assessee had not demonstrated that the industrial land was not part of the factory building let out to the tenant. In the absence of such demonstration, the land forms part of the asset subject to wealth tax and cannot be separated out for a deduction from the computed market value. [Paras 25]

The Assessing Officer was correct to treat the industrial land as part of the factory building for wealth-tax valuation; no deduction of the land value is directed.

Final Conclusion: The appeal is partly allowed: the Tribunal affirms that the leased industrial land and factory building are assets taxable under the Wealth Tax Act for Assessment Year 1997-98, rejects the claim to treat the property as an exempt business asset, directs the Assessing Officer to adopt the annual value as determined under Section 23 of the Income-tax Act when computing net maintainable rent and related valuation, and declines to separate the industrial land value from the factory building for the purpose of wealth-tax computation.

Applicability of RBI COVID-19 moratorium circulars to pre-existing default and one-time settlement - Revocation of in-principle one-time settlement (OTS) - Maintainability of writ jurisdiction in presence of SARFAESI/DRT proceedings - Classification as Non-Performing Asset (NPA) - Benefit of RBI measures limited to continuity of viable businesses

Applicability of RBI COVID-19 moratorium circulars to pre-existing default and one-time settlement - Benefit of RBI measures limited to continuity of viable businesses - Classification as Non-Performing Asset (NPA) - Whether the RBI COVID-19 circulars and policy guidelines entitled the Petitioners to relief or prevented revocation of the OTS in view of defaults predating the pandemic. - HELD THAT: - The Court held that the RBI circulars and policy guidelines were intended to mitigate financial distress arising from the COVID-19 pandemic and to ensure continuity of viable businesses, and do not extend to debt accounts where defaults occurred prior to the pandemic and legal steps had already been initiated. The Petitioners' defaults dated back to 2018, the account was declared NPA and SARFAESI proceedings were instituted and finally upheld by the DRT. The OTS was a standalone commercial settlement offered in respect of an already defaulted account; its legality and revocation could not be tested by reference to the COVID-19 regulatory measures which are not designed to protect such pre-existing defaulters. The Court observed that the in-principle acceptance in March 2020 contained specific conditions (notably payment by 27th March, 2020) which were not complied with, and that substantial time thereafter elapsed without performance or concrete steps to consummate payment. Accordingly, the RBI circulars did not provide a ground to quash the revocation of the OTS or to mandate further time to the Petitioners. [Paras 27, 32, 33, 34, 36]

RBI circulars and policy guidelines do not entitle the Petitioners to relief; revocation of the OTS cannot be set aside on the basis of those circulars.

Maintainability of writ jurisdiction in presence of SARFAESI/DRT proceedings - Revocation of in-principle one-time settlement (OTS) - Whether the writ petition was barred or otherwise non-maintainable because SARFAESI proceedings/DRT orders provided the exclusive remedy. - HELD THAT: - The Court noted the challenge to maintainability raised by the respondent based on the existence of SARFAESI/DRT proceedings and precedents indicating limited scope for writ intervention where specialized fora are available. However, the Court proceeded to examine the merits rather than dismiss the petition as barred at the threshold. On consideration, given the factual matrix - longstanding defaults, prior judicial orders, and failure to honor undertakings and the OTS conditions - the Court found no basis for granting the equitable relief sought. While the existence of SARFAESI/DRT proceedings was relevant to the character of the dispute, the Court's ultimate conclusion turned on the merits (non-applicability of COVID-19 relief and non-performance), not on a preliminary jurisdictional bar. [Paras 15, 16, 17, 25, 38]

Maintainability challenge did not operate to grant the Petitioners relief; the writ petition was dismissed on merits and not allowed to prevent IL&FS from proceeding in accordance with law.

Final Conclusion: Writ petition dismissed on merits; revocation of the in-principle OTS upheld and Respondent IL&FS permitted to proceed against the Petitioners in accordance with law.